Senior French defence chief told of former PM's 'kickback scam'
By Lire Aussi
A former controller-general of the French armed forces told a parliamentary mission he was informed that former French Prime Minister Edouard Balladur financed his presidential election campaign with illegal kick-backs on the sale of submarines to Pakistan.
Jean-Louis Porchier spoke of the discovery in testimony – until now kept secret – before a French parliamentary committee, and which Mediapart reveals here. He said he was told about the scam by Michel Ferrier, responsible for the service controlling French defence exports, who also told him that other kickbacks went into the coffers of the centre-Right Republican Party1, led by Balladur's then defence minister and close political ally, François Léotard.
Porchier's evidence is of major importance to an ongoing investigation into the murders of 11 French naval engineers in the Pakistani port of Karachi, where they were helping to build one of the three submarines.
Porchier's claim raises further questions over the role of French President Nicolas Sarkozy who was, at the time of the deal and kickback payments in 1994, Balladur's budget minister and in 1995 became his election campaign spokesman.
The relatives of the murdered engineers have accused Sarkozy of covering up evidence from the Paris-based independent judicial investigation into their deaths in a bomb blast in Karachi in 2002. This complex affair, which now threatens President Sarkozy's political future, is explained in a simple Q and A guide published on Mediapart English here, and in a sub-titled video report by Mediapart here.
The anti-terrorist magistrate leading the investigation into their deaths, in a suicide bomb attack in 2002, believes a dispute over the kickbacks motivated the attack. Until recently, the officially-supported theory in both France and Pakistan was that al-Quaeda was responsible.
1: The Parti républicain was created in 1977 and disolved in 1997. It was led by François Léotard from 1982-1988 and again from 1995-1997. It was an ally of, and to a degree a rival on the Right to, the Gaullist RPR party which was led over this period by Jacques Chirac.
Commissions were 'totally excessive and unjustified'
Porchier gave his evidence one year ago, on December 15th, 2009, during a closed-door hearing before the French parliamentary fact-finding mission into the Karachi bombing. It is recorded in a report drawn up by the mission's team of Members of Parliament, but was only handed over to the magistrate leading the investigation into the murders of the engineers, Judge Marc Trévedic, at the beginning of this month. The report was sent to Trévedic by one of the now-disbanded mission's members, Jean-Jacques Candelier, a Communist Party MP for the Nord département.
Porchier was responsible for two internal enquiries into the September 1994 sale to Pakistan of the three Agosta 90B submarines, which he described as amounting to an industrial and financial waste for France. Porchier led separate enquiries in 1997 and 1999.
The parliamentary mission invited him to comment on the commissions paid during the deal. These are cash payments, amounting to bribes, destined to local officials and intermediaries who helped France secure the contract, and which were commonly referred within the arms industry as ‘Exceptional Commercial Costs', known in French as FCEs.
He replied that they were "totally excessive and unjustified". These commissions totalled 84.7 million euros (the value of the amount paid, at that time, in French francs), representing just more than 10 per cent of the overall sum of the contract, worth 826 million euros.
The investigation by Judge Trévedic into the engineers' murders has now been joined by another, parallel judicial investigation opened this autumn by Judge Renaud Van Ruymbeke into the suspicion that kickbacks from the deal found their way back to France for the purposes of illegal party funding.
Van Ruymbeke's investigation is not part of Trévedic's, but the two have become complimentary with regard to the central suspicion held by Trévedic that the kickbacks were ultimately the reason for the attack against the engineers.
Both magistrates have established that two businessmen were imposed in the deal by Balladur's government during the summer of 1994, when the negotiations for the sale had already been completed. The businessmen, both of Lebanese origin, are Ziad Takieddine and Abdul Rahman El-Assir.
According to several witness statements together with documental evidence collected by the magistrates, part of the 33 million euros allocated to the network set up by the two men returned to France to fund Balladur's bid for the presidency – running against fellow conservative Right candidate Jacques Chirac – in elections in 1995.
· A 'daft and inept' arms sale that served neither country
These ‘return kickbacks' – bribes that never reached local intermediaries but which were re-routed, through complex financial structures, back to France – are known as retro-commissions.
While the common practice of payment of bribes in international arms deals was finally outlawed by an OECD member government agreement in 2000, the payment of retro-commissions was in 1994, as of course now, illegal under French law.
Nicolas Sarkozy and Edouard Balladur.
Jean-Louis Porchier told the parliamentary mission that he learned about the kickbacks from Ferrier who was, at the time, export control director of the French Armed Forces general secretariat, the SGDN. Their conversations were held during Porchier's enquiries into the submarine sale. Porchier told the MPs that Ferrier said the contract had no military sense for the Pakistanis, nor a financial one for France. Porchier quoted Ferrier as saying: "'This contract allows for the re-cycling of dubious money on the Pakistani side and, on the French side, it allows for the payment of retro-commissions. The retro-commissions account for 10 per cent of all the FCEs. Of this 10 per cent, part of it was for the electoral campaign of Monsieur Balladur and another part was for Monsieur Léotard.'"
Porchier told the MPs that he gave "credit" to Ferrier's account. He said Ferrier was known among his entourage for his "frank talk".
Although Porchier's testimony before the MPs has only now been revealed, Mediapart reporters Fabrice Arfi and Fabrice Lhomme had interviewed Porchier in preparation for their book on the Karachi contract – published earlier this year (please see Black Box at bottom of page) – shortly after he gave his evidence before the parliamentary fact-finding mission.
He told Arfi and Lhomme that Ferrier was "one of the best-informed people in France regarding the hidden side of arms sales". Porchier told the Mediapart reporters that of the 8.5 million euros of retro-commission cash intended for French politicians, half of it was for Balladur's election campaign. "I was scandalized," he told them. "And clearly so was the person I was speaking with [Ferrier]. I remember that he was certain, he was very precise and thus clearly well-informed."
He continued: "This is, in substance, what [Michel Ferrier] told me. ‘This contract is really daft, an ineptitude, and this from every point of view. In serves no purpose for the Pakistanis, who won't be able to confront India with three poor submarines. Same for Cherbourg [the Cherbourg-based DCN naval contractor that built the submarines], it's peanuts. What's more, it's costing the French state a lot of money, because the contract is largely loss-making. In fact it served, on the Pakistani side, for laundering dirty money, money made from drugs, and on the French side to finance politicians.'"
"I asked him what he meant by that, and he answered me ‘It's simple, 10 per cent of the commissions [bribes] handed over to the intermediaries was for retro-commissions in France, in other words about 50 million [French] francs. Half of this sum served to finance Edouard Balladur's campaign, the other half to bail out the coffers of the Parti républicain [centre-Right Republican Party]."
Spy boss and defence minister disagree
Following Porchier's contribution before them in December 2009, the parliamentary fact-finding mission subsequently questioned Michel Ferrier later that same month. Ferrier appeared clearly embarrassed by the weighty implications of Porchier's account of their conversations. "If you turned what I said into the conditional [verb] I could accept that," he told the mission. "It is possible that I said that, but in a bantering manner."
The mission's chairman, ruling UMP party MP for the Cher department, Yves Fromion, asked him: "Why did you then make such a statement?"
Ferrier replied: "Because it was plausible." He added: "I repeat, Monsieur Porchier put into the indicative what I no doubt said using the conditional."
Later in his testimony, he told the MPs that he could not remember there being question of financing a presidential campaign through retro-commissions from the Agosta contract.
Mediapart reporters' book 'The Karachi Contract'.
In another development this month, Judge Renaud Van Ruymbeke, in charge of the investigation specifically concerned with the suspected political financing through retro-commissions from the deal, questioned the former head of the French foreign intelligence service, the DGSE1, Jacques Dewatre, on December 7th. Dewatre ran the service from 1993 to 2000. Mediapart has gained access to the official statement he gave Van Ruymbeke.
Dewatre told the judge that, contrary to other high-level witness statements already given, the DGSE was never involved in investigating retro-commissions from the Agosta deal. "I don't see how the DGSE could have investigated the commissions linked to arms sales for which it has no competence," he told the judge. "Between 1993 and 2000, I never had knowledge of an investigation asked for from the DGSE into commissions or retro-commissions from arms sales."
Dewatre's statement on this point directly contradicts what former French defence minister Charles Millon told both Van Ruymbeke in testimony he gave last month, and Mediapart's Fabrice Arfi and Fabrice Lhomme when they interviewed him earlier this year for their book, ‘The Karachi Contract' (please see 'Boite Noir' bottom of page).
During Van Ruymbeke's November 15th questioning of Millon, who as defence minister was responsible for the DGSE, the judge referred to ‘The Contract' as "the book". He asked Millon: "Did the Ministry of Defence task the secret services to trace the movements of funds from retro-commissions as you indicated while citing [the names of countries] to the authors of the book (page 225)?"
Millon replied: "I told them exactly that the DGSE had investigated whether there were deposits of sums that came from commissions linked to armaments, and it appeared that there were movements in the countries cited by the authors, but the DGSE never managed to find solid proof of these deposits and movements. It was Dewatre who supervised these operations."
When Van Ruymbeke questioned Dewatre on this point earlier this month, the former secret service chief replied: "I think Monsieur Millon has confused the service concerned. I have never supervised this type of operation concerning arms sales, neither to look for traces of commissions, nor to look for retro-commissions. That is an affair concerning purely French interests, and the DGSE works only on abroad."
Dewatre also denied being involved in any of the phone taps mentioned by Millon, although the former defence minister did not specify the actual service involved. In his testimony, Millon told the judge: "I asked for them from the Prime Minister, Monsieur [Alain] Juppé, in the person of his principal private secretary, Monsieur Gourdault-Montagne, who is today an ambassador. It was my principal private secretary, Jean-Louis Chaussande, who contacted him. François Lépine, Patrick Molle and Pierre-Louis Dillais had received death threats and that was the reason the phone taps were ordered. It involved an official procedure, the taps having been carried out by, I think, the centre at the Invalides."
Dewatre told Van Ruymbeke that he had no recollection of having "solicited nor read the transcripts" of the phone taps regarding death threats made to the defence minister's private staff. The taps could have involved a service called the DPSD, whose mission is the protection of defence personnel, he told the judge.
The former DGSE chief also contested Millon's statement that he received verbal reports from DGSE agents. "I am astonished by Monsieur Millon's words because it is the general director of the DGSE who is the usual correspondent for the Minister of Defence, or his private secretary, neither of whom, from recollection, raised with me the subject of problems about the arms market," he told the judge. "I cannot say whether they had contacts with other members of the DGSE."
English version: Graham Tearse