Wolf Richter: Blowback from Sarkozy’s Election Finance Shenanigans

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Europe greeted with excitement—and exasperation—the arrival of the “President of Growth,” as Le Figaro has renamed François Hollande, perhaps tongue in cheek given its conservative bend. Merkel would receive him with “open arms,” but the fiscal union pact that 25 of 27 EU countries signed and that Hollande wants to renegotiate, would remain “non-negotiable” because, as she patiently explained, “it’s not possible to renegotiate everything after each election.” But she might be open to a growth pact so long as it doesn’t exacerbate the debt crisis.

Meanwhile, the day after his defeat, outgoing President Nicolas Sarkozy confirmed in a meeting with some of his ministers and party heavy weights that he’d quit politics. “I will not be a candidate in the legislative elections or any elections to come,” he said. He who is going down in history as the only President of the Fifth Republic during whose term France actually lost jobs—200,000 while the working population continued to swell, pushing unemployment to near 10%—well, he wanted to take his marbles and “live a little normally.” He complained about journalists dogging him, about how he couldn’t even have lunch with his family at a restaurant. “I’m spied on,” he said (ironically, as we will see). “I hope they will leave me alone.” But that’s precisely what they won’t do—because on May 15 at midnight, when he will cease being President of France, Sarkozy will also emerge from under the umbrella of presidential immunity that so far has protected him against a ton of increasingly malodorous allegations.

“Yes, as Prime Minister, I myself supervised the issue of financing Sarkozy’s campaign from Tripoli,” Baghdadi Ali Mahmudi, Secretary of the General People’s Committee of Libya from March 2006 to September 2011, told the Court of Appeals in Tunesia, when it examined the extradition request filed against him by Libya. And he detailed how the Gaddafi regime financed the campaign of Nicolas Sarkozy in 2006 and 2007 through a secret funding system via Switzerland—to the tune of €50 million.

That was on October 25, 2011, but now two lawyers who were present during the hearing have passed on this information and much more to Médiapart, a subscription-only French investigative journal whose series on Sarkozy’s alleged violations of campaign financing laws has become a blow-by-blow documentation of a political culture of corruption.

Scandalous accusations have bedeviled every presidential campaign in France since 1988 when the first campaign finance laws went into effect. Before, it was a free for all—corporations, foreign governments, and individuals with enough moolah to be taken seriously were legitimate sources of funding. Now, contributions are limited and funding from foreign countries is prohibited. But just because the laws changed didn’t mean that the political culture would change. And enforcement bodies purposefully lacked teeth.

Médiapart is relentless in its revelations. On April 28, it published an official Libyan document from the archives of the Libyan secret service that it had obtained from former high-ranking Libyan officials who are now in hiding. Issued by the Department of External Security, dated October 12, 2006, and signed by Musa Kusa Imuhamad, head of external security, the document (in Arabic) “proved,” according to Médiapart, that Sarkozy accepted €50 million from the Gaddafi regime. From Médiapart’s translation into French:

In reference to the instructions issued by the liaison office of the People’s General Committee concerning the approval to support the campaign of presidential candidate, Mr. Nicolas Sarkozy, for the amount of fifty million euros.

We confirm to you the agreement in principle on the subject cited above, and having reviewed the minutes of the meeting held October 6, 2006, attended on our side by the Director of the Libyan intelligence service and by the president of the Libyan African Investment Fund, and on the French side, by Mr. Hortefeux and Mr. Ziad Takieddine, and during which an agreement was concluded to determine the amount and method of payment.

Brice Hortefeux, godfather of Jean Sarkozy, was Minister of Territorial Collectivities at the time—“Sarkozy’s gun carrier,” the French press called him. It was his first of a variety of ministerial jobs from 2005 until his departure in February 2011.

And Ziad Takieddine, a Franco-Lebanese arms dealer deeply entangled with the French right, was allegedly involved in scandals of kickbacks on French arms deals. He was fingered in French campaign finance violations. And French oil company Total allegedly paid him a commission to obtain gas contracts in Libya, the very country that Sarkozy would later move heaven and earth to attack. His “career” spans what Libération called “15 years of relations of trouble between the Sarkozy clan and countries like Libya or Pakistan.”

Médiapart had obtained that document as it was investigating the so-called Karachi case in which bribes, and kickbacks on those bribes, were allegedly paid as part of the sale in 1994 of three French submarines to Pakistan, a $1 billion deal. Bribery was legal in France until 2000, but kickbacks from bribes back to France were patently illegal even then. These kickbacks allegedly funded the 1995 presidential campaign of Edouard Balladur, Prime Minister at the time, and mentor of Sarkozy—his Budget Minister. The deal took a tragic turn in 2002, when a bomb in Karachi killed 11 French submarine engineers and three other people. After suspecting Islamic terrorists for seven years, French prosecutors changed their minds in 2009 and pointed at new culprits: pissed-off Pakistani officials who hadn’t been paid their promised bribes. Apparently, Balladur, after losing the election, had stiffed them.

Médiapart also broke the “Woerth-Bettencourt affair” which continues to fester and spread, and which had started out as a highly mediatized family feud between Liliane Bettencourt—France’s richest woman and heiress of L’Oréal—and her daughter. Bit by bit, shenanigans began to seep out: allegations of tax evasion, influence peddling, and illegal cash payments to Sarkozy’s party, the UMP—involving Eric Woerth, at the time budget minister and fundraiser for Sarkozy’s 2007 campaign. And when the affair refused to go away, it got worse: editors of major newspapers claimed that the French interior intelligence service, the Division Centrale du Renseignement Intérieur (DCRI), had illegally wiretapped the phones of reporters who were investigating the affair, that it followed them around, and spied on them with counter-intelligence techniques. And Sarkozy had allegedly overseen himself the creation of that team at the DCRI.

Obviously, everyone denies everything, and little or nothing may ultimately come of these investigations. Similar scandals have embroiled all prior French Presidents of the Fifth Republic, regardless of their political shading. Only Jacque Chirac, after he lost his immunity, was rapped mildly and symbolically on his aging knuckles when, on December 15, 2011, a court found him guilty of diverting public funds and abusing public confidence. He walked away with a two-year suspended sentence. So Sarkozy too might escape unscathed. But French reporters will continue to dog him. And voters have expressed their opinion—perhaps hoping that presidential history would, this time, not repeat itself.

And so the little guy is trying to fight back: this time it’s Jérôme Kerviel, the meek-looking French guy who became famous in January 2008 as the junior trader who lost €4.9 billion at French mega-bank Société Générale. He was condemned to five years in prison, though he claimed that his bosses had known about and had tolerated his activities. He just couldn’t prove it—until now. Turns out, Société Générale might have tampered with evidence and used him as sacrificial lamb during the financial crisis. Read…. David and Société Générale.

And here is an awesome and biting cartoon by Ben Garrison: how banks and their political “legs” step on the little people on both ends of the political spectrum.