The sting in the tale of Tapie and the Crédit Lyonnais payout

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The controversy over the 403 million euros of public funds awarded in 2008 to French businessman Bernard Tapie in his dispute with French bank Crédit Lyonnais returned to the fore this month, lighting a fuse to a series of scandals-within-the-scandal. Laurent Mauduit reports.

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In 2008, the flamboyant French tycoon, one-time minister, multi-millionaire, bankrupt, actor and singer Bernard Tapie, was awarded 403 million euros of tax-payers' money in a private compensation settlement that ended a dispute with the former state-owned Crédit Lyonnais bank which had began in the courts 12 years earlier.

The case centred on the bank's sale of Tapie's business assets in the early 1990s, for which it was mandated by him. Also at this time, in 1993, the then state-owned Crédit Lyonnais, (now called LCL after it was privatized and bought by the Crédit Agricole), was at the centre of one of France's biggest-ever banking scandals when it became the subject of a massive public bail-out after going bankrupt through high-risk lending.

Tapie eventually launched a lawsuit against the bank which he accused of fraud after it paid him less than the true value of its sale of his controlling stake in sportswear and accessories company Adidas.

But in October 2007, five months after Nicolas Sarkozy's election, for which Tapie was notably a campaigner, the state agency responsible for managing the liabilities ofthe Crédit Lyonnais, the Consortium de Réalisation (CDR), agreed with Tapie's representatives to settle the dispute through out-of-court arbitration. The following year, the CDR reached a deal with Tapie to pay him 390 million euros, of which 40 million euros were granted for ‘moral' (personal) damages.

Out of the 403 million euros he was awarded, Tapie was also ordered to pay outstanding tax, welfare payments and other charges he owed relating to his former business interests. Once all the deductions were made, he was left with a net sum of 230 million euros.

This month, senior French public prosecutor Jean-Louis Nadal began an investigation into the legality of the arbitration procedure, after a legal move launched by opposition Socialist Party Members of Parliament. This followed evidence revealed in a report on the Tapie case by the president of parliament's finance commission.

The MPs are challenging the probity of a decision by French economy and finance minister Christine Lagarde to have the case removed from the courts, where in effect the state, in the form of the CDR, was being sued by Tapie. Her move in favour of a private three-man arbitration panel was very largely to Tapie's benefit.

In a letter addressed to Nadal, prosecutor with France's highest court of appeal, la cour de cassation, the MPs notified him that the parliamentary report revealed evidence that suggested the decision to move the case into private arbitration "had the aim of favouring personal interests to the detriment of public interest".

Nadal has already approached the finance ministry, the finance commission of parliament and the Court of Accounts (la Cour des comptes) France's national audit office, for them to hand over documentation relating to the arbitration.

A public liability established by Strauss-Kahn

"I've always done everything in complete transparency, always," Lagarde insisted in a press conference on April 4th. In a communiqué released separately by her ministry, Lagarde warned that she was even considering her own legal action against the Socialist MPs for suggesting her complicity in any wrongdoing. The communiqué defined her role as that of "managing the bankruptcy of the Crédit Lyonnais into which its directors had led it into during the 1990s". It claimed that the decision to go for private arbitration was "to safeguard the interests of the State" by halting legal action in court that had already lasted "numerous years" and could have otherwise lasted for "several more years".

Meanwhile, the Court of Accounts, the national audit office, has recommended that two senior officials should be sent before a disciplinary court for their role in the huge payout to Tapie. One of them, CDR head Jean-François Rocchi is suspected of having modified the records of the CDR board meeting that ratified the sum. He has strenuously denied any wrongdoing.

Now Mediapart has learnt that the basis for public liability for payment of the compensation awarded to Tapie was established in 1999 by the current International Monetary Fund chief Dominique Strauss-Kahn when he was French economy and finance minister.

Strauss-Kahn, serving in the Socialist government led by then-prime minister Lionel Jospin, oversaw the privatization of the Crédit Lyonnais in 1999. In an attempt to raise the value of the bank, he ordered that the CDR, established in 1995 to manage its liabilities, would be responsible for a "certain number of litigation risks", according to a letter he wrote on March 17th 1999 to the bank's then-chairman Jean Peyrelevade. Among them, Staruss-Kahn wrote, were the "eventual financial consequences of the actions engaged by the mandated liquidators of the Tapie group." In effect, Strauss-Kahn relieved the bank's future owner, the Crédit Agricole, of any danger it would inherit a financial liability in the Tapie case.

In a report sent this year to French Prime Minister François Fillon, dated February 3rd and reproduced below here, the president of the Court of Accounts, Didier Migaud, questioned the legality of Strauss-Kahn's move.

"The scope of the CDR's guarantee towards [Editor's note: the liabilities of] the Crédit Lyonnais remains a source of dispute, which has already led the Court [audit office] to express its reservations after its earlier audit," wrote Migaud. "The Court considers that the CDR substituted itself in place of the responsibility of the Crédit Lyonnais in the Adidas-Tapie case, above what could have been authorized in its [founding mission] protocol. The letter of the Minister of the Economy, Finance and Industry dated March 17th 1999 cannot be considered as simply interpretative."

 

Didier Migaud's letter to Prime Minister François Fillon (click on the document to enlarge):

 

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Back in business

Tapie, now 68, a brash, twice-fold rags-to-riches tycoon who first found his fortune in the 1980s by buying up bankrupt businesses and selling them off at a profit, was made a minister (for urban affairs) in 1992 under then-President François Mitterrand. It was reportedly at Mitterrand's behest that, to pursue his political career, he decided to sell-off his business interests, and mandated the Crédit Lyonnais to do so.

They were offloaded in a series of complicated financial manouevres involving holding companies, and importantly involved the sale of his controlling stake in Adidas, at the centre of his dispute with the bank; Tapie argued it had secretly defrauded him of the real value of the sale to the late businessman Robert Louis-Dreyfus.

At this same period, Tapie, who made unorthodox wheeler-dealing his personal trademark, became the subject of a number of judicial investigations, forcing his resignation from government in 1993. Tapie was eventually made bankrupt in 1994 by the liabilities on his companies. As the owner and president of Marseille football club, Olympique de Marseille, he was sentenced to a year in prison in 1996 for his role in a 1993 match-fixing scandal.

Barred from business as a bankrupt, stripped of his rights to stand for election in politics and banned from professional football, Tapie bounced back onto the public stage at the end of the 1990s as a TV and film actor while pursuing the case against the Crédit Lyonnais. In 2010, following the controversial 2008 arbitration decision, he won a legal battle to remove his personal responsibility in the 1994 bankruptcy of his businesses, and created an online consumer goods sales company with his son Laurent.

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English version by Graham Tearse

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The sums awarded to Bernard Tapie, gross and net, cited in this report were corrected on May 21st according to latest information revealed by the French national audit office, the Court of Accounts. They were in fact greater than originally reported, by 13 million euros for the gross sum, and by 10 million euros for the net sum, he received.