It was not a particularly pleasant day for Christine Lagarde on the third day of her trial on Wednesday, December 14th, before the Cour de Justice de la République (CJR) in Paris. Lagarde, currently managing director of the International Monetary Fund, had to listen to a string of witnesses giving evidence about her actions as French economy minister in 2007 and 2008 when she approved an arbitration process that awarded 403 million euros of taxpayers' money, including 45 million euros in personal damages to tycoon Bernard Tapie. The IMF boss, who sat taking notes throughout the evidence, is accused of “negligence” in her decision to sign off on the process, a charge she denies.
As it happened, the most eagerly-anticipated witness did not appear on Wednesday. Stéphane Richard – who is now chief executive and chairman of French telecom giant Orange – had been Lagarde's chief of staff at the Ministry of the Economy at the time the arbitration procedure was agreed and when the award was made in July 2008. Himself placed under formal investigation in the affair, Richard had been due to give evidence on Wednesday morning before the CJR, a special court that tries ministers accused of wrongdoing in the course of their official duties. However, at the last minute Richard chose not to appear, exercising his right to refuse to give evidence on the grounds that he could incriminate himself. The court, made up of three judges and 12 politicians, refused to allow a statement by Richard to be read out.
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Instead the highlight of the proceedings was the evidence given by Bruno Bézard. Bézard, 53, is now a partner in an investment fund but at the time he worked at the Ministry of the Economy as director of the powerful Agence des Participations de l'Etat (APE). This is the body that oversees public investments and at the time was in charge of the Consortium de réalisation (CDR), the 'bad bank' set up to manage the assets of Crédit Lyonnais, including its liabilities in the Adidas affair that gave rise to the arbitration process and its award to Bernard Tapie. That 2008 arbitration award was subsequently struck down seven years later by the courts.
Bézard, who was later director of the French Treasury, made it clear that he had opposed the setting up of the arbitration and that the APE had flooded Christine Lagarde's office with memos to that effect. “On several occasions I indicated to the chief of staff [Richard] our opposition to an arbitration, by making it known that I was available to speak to the minister if he wanted me to,” said the former civil servant. His memos went unheeded and he and his colleagues' warnings were ignored, even though he had made it clear he was available at weekends and holidays to discuss the matter.
“We were hostile to the arbitration because we were absolutely convinced it was fundamentally contrary to the interests of the state, even without being able to suspect a fraud,” Bézard told the court. “The Cour de Cassation [editor's note, France's top appeal court which gave its verdict in June 2016] showed we were right and that there had been absolutely no reason to agree to this generosity that the arbitration represented.” That arbitration cost the French taxpayers 403 million euros, including the 45 million euros that went to Bernard Tapie in personal damages. Bézard was also critical of the ministry's reaction to the award. “Not to file an appeal against this arbitration was a mistake,” he declared.
The argument put forward by Christine Lagarde that the use of arbitration reduced legal fees that were becoming too high for the CDR was rejected by Bruno Bézard. “The CDR dealt with bigger cases. The lawyers' fees should have only represented 1.2 million to 1.3 million euros for the Tapies,” he said. Bézard also said that he was cut out of the loop by the head of the CDR, for whom the APE had responsibility. He said CDR boss Jean-François Rocchi had instead dealt directly with Stéphane Richard and engaged in “bilateral discussions with the other side”, in other words Tapie's camp. This was how, he said, the idea of personal damages had been introduced into the arbitration process “without the knowledge of the minister and behind the state's back”.
Yet even without the personal damages, the entire arbitration process had been “contrary to the interests of the state” which was made to run “colossal risks”. He said that after the award “in the face of such a scandalous decision one had to appeal, even if there was just one chance in a thousand of winning”. Christine Lagarde did not, however. Though the arbitration payout has now been annulled, Bézard told the court that “recovering [the money] will be complex”.
The former top civil servant outlined the difficulties he faced in trying to get the minister to oppose the arbitration procedure. At that time, Bernard Tapie had been received as a friend by the newly-elected President Nicolas Sarkozy at the Elysée, and the tycoon had also met with Sarkozy's chief of staff Claude Guéant, Stéphane Richard and even Christine Lagarde on one occasion. “There'd have been no point in insisting on asking for an interview with the minister because the decision for an arbitration had been taken, and it's not for the [heads of department] to demand to be seen by the minister, they inform the chief of staff,” Bézard said. In the context of Tapie's close relations with the higher echelons of state, Bézard noted that there were many “surprising things” in the whole case “including in the workings of the justice system”.
Christine Lagarde's lawyer, Patrick Maisonneuve, sought to play down the significance of Bruno Bézard's comments in his line of questioning, as did the prosecutor Jean-Claude Marin, who had previously called for the prosecution to be dropped. But the former civil servant carried on undeterred. The session was an uncomfortable one for Lagarde. From the start of the case she has presented herself as a “business lawyer” and a “technician” rather than a politician – though she had already been a minister for overseas trade under Sarkozy's predecessor President Jacques Chirac. Yet it was she who allowed the arbitration to go ahead and she who refused to appeal against the outcome.
Another witness before the CJR was Lagarde's immediate predecessor as minister of the economy, Jean-Louis Borloo, who was only in the post for a month before being made environment minister. He played down his friendship with Tapie, whose lawyer he had once been. Borloo told the court that in his brief time at the economy ministry he had never heard talk of an arbitration process for Bernard Tapie. “There was no file and it was never raised with me by anyone,” he said. Borloo did however admit that a euphoric Tapie had come to see him at the ministry “for a coffee” after Sarkozy's election, in the presence of Stéphane Richard. Borloo also said that it had been Sarkozy's chief of staff Claude Guéant and his deputy chief of staff François Pérol who had “suggested” that Richard be his chief of staff in the first place.
The next witness was Thierry Breton, the minister of the economy from 2005 to 2007 under President Jacques Chirac, who said he was aware of the litigation between Tapie and the CDR, had read the APE's memos and had tried to seek a fair and lasting solution to the dispute. Breton noted that he had never met Tapie and that no one had ever sought to intervene on the businessman's behalf. Though Breton praised his successor, his evidence did little to remove the impression that the ministry's handling of the Tapie affair had been different under Lagarde's tenure.
Another witness was Bernard Scemama, appointed as head of the EPRF – the CDR's parent organisation – even though he was close to retirement. The head of the CDR, Jean-François Rocchi, also gave evidence, describing himself as a loyal servant of the state who had been a “victim” of the fraud. Both Rocchi and Scemama have been placed under formal investigation – one step short of charges being brought – for alleged “conspiracy to commit fraud” in the affair. Also under formal investigation are Bernard Tapie, Stéphane Richard, one of the arbitration judges Pierre Estoup and Tapie's lawyer Maurice Lantourne. All deny any wrondoing.
Lagarde's trial is expected to end on Monday December 19th.
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The French version of this article can be found here.
English version by Michael Streeter
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