France Telecom CEO In Custody Over Corruption Probe

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The last time we encountered the name Stephane Richard, CEO of France Telecom Orange, he was deflecting poor iPhone sales on frugal customers. While we don't know if French customers have become less frugal in the past two months, we do know that Mr. Richard has bigger problems on his hands than declining top and bottom lines: such as suddenly being embroiled in the Bernard Tapie corruption scandal that previously focused on Christine Lagarde, and which this morning led to the CEO being held for questioning over his role in a 2008 arbitration process that resulted in a large pay-out to businessman Bernard Tapie, a judicial source said. "Richard was at the time head of cabinet to Christine Lagarde, who was finance minister to conservative former president Nicolas Sarkozy before she became head of the International Monetary Fund."

From FT:

Stéphane Richard, chief executive of France Telecom, was taken into custody on Monday for questioning over his role in an arbitration process that led to a €400m payout in 2008 to a prominent supporter of former President Nicolas Sarkozy at a time when Mr Richard was a top official in the finance ministry.

 

A court spokeswoman said Mr Richard, who has denied any wrongdoing, was placed in custody when he arrived for a scheduled hearing on the case, which involved the settlement of a dispute between the businessman Bernard Tapie and the state entity that managed the residual assets of the failed bank Credit Lyonnais.

 

The arbitration, which awarded €285m plus interest to Mr Tapie, ended a decades-long dispute in which he claimed he had been defrauded by Credit Lyonnais over the sale in the 1990s of Adidas, the sports goods company, which he previously owned.

 

The then-socialist opposition, which instigated the court action, claimed the arbitration process was rigged to reward Mr Tapie for his backing for Mr Sarkozy in the 2007 presidential election.

 

Mr Richard was director of cabinet to Christine Lagarde, now head of the International Monetary Fund and then finance minister, when the arbitration process took place.

 

* * *

 

Last week, Arnaud Montebourg, the industry minister, was reported as suggesting that Mr Richard should step aside at the head of France Telecom, which is 27 per cent state-owned, if the court placed him under formal examination after questioning.

 

Mr Richard retorted by saying he had been assured of the confidence of President François Hollande and it would be up to the board of France Telecom, which will change its name to Orange in July, to decide. The state has three representatives on the board.

In other words, from "questioning" to a pseudo-nationalized transition, in which the government does the "fair" thing and quietly takes over a domestic company, now that Montebourg ideas about nationalizing foreign companies have failed to meet with resounding success.

Which also means that a year from today, "frugal customers" will be the least of Orange's concerns even if it is presented extensively as the reason for sliding sales, as the government proves once more than when it comes to effectively crushing companies, there is no easier way than simply taking them over.