Time up for men accused of greasing palms with Elf's oil

<a href=news.ft.com>FinancialTimes.com By Robert Graham

Published: April 22 2003 5:00 | Last Updated: April 22 2003 5:00 The air of injured innocence is slowly evaporating among the key defendants in France's biggest ever corruption trial.

In all, 37 people have been charged with siphoning off almost €400m (£276m) in the late eighties and early nineties from Elf, then a French state-owned oil group.

After a month of hearings, the whereabouts of most of the funds remains a mystery.

But the trial judge has succeeded in teasing out the lavish whims of Elf executives and their acolytes, forcing many to own up to serious personal enrichment.

Loïk Le Floch-Prigent, Elf's chief executive from 1989 to 1993 and a central figure in the case, admitted his personal gains with masterly understatement, saying: "Things got out of hand."

Accused of removing €183m of Elf money, and now in poor health as he serves a 2½ year prison term imposed at a previous corruption trial, he appears relieved to confess. "I see this as an occasion to get things off my chest," he said.

Alfred Sirven, who handled many of Elf's pay-offs to middlemen and foreign dignitaries, and is charged with siphoning off €168m, has been a little less contrite.

Soon after the judicial investigation began in 1994 he went on the run, and police only caught up with him in the Philippines in 2001. "I am guilty of certain things: this I have known for a long time, but all the same that does not really explain how these things happened," Mr Sirven observed in his gravelly voice.

These men and the other defendants are bitter that their political superiors are absent from the dock - even though they claim Elf was used as a secret treasury for under-the-table state activities from the foundation of the Fifth republic in 1958 until the group's privatisation in the mid-1990s. But - as the sharp-tongued judge Michel Desplan has reminded them - this is no answer to the serious corruption charges. Mr Le Floch-Prigent has, for instance, been asked to justify the purchase of a $9.3m Paris mansion, a chateau and a divorce settlement after 18 months of marriage that cost Elf €4.5m.

He replied: "At Elf everything was exaggerated. It eroded one's sense of reality . . . I allowed myself to get carried away."

At first he insisted the luxury town house had been bought for corporate relations with the ulterior purpose of being for the use of president Omar Bongo of Gabon, where Elf had vital oil interests. (A €115,000 kitchen redecoration was initially classified under the heading of 'gabonisation' of the house.)

But Fatima Belaid, Mr Le Floch-Prigent's ex-wife, told the court that the place was for her ex-husband's "personal use", and that its ownership was concealed to avoid taxes.

This prompted the judge to ask Mr Le Floch-Prigent: "For company representation, was not this place too much even for the president of Elf?" His reply became one of the most quoted lines from the case: "It was a folie des grandeurs. Let's say it was a mistake; but it was not a crime."

To defend the fact that his expensive divorce was settled through offshore Elf bank accounts, Mr Le Floch-Prigent invoked his close relationship with the late president François Mitterrand.

The court heard he told the president that if the divorce turned messy there was a risk his ex-wife might reveal what she knew of Elf's activities, causing "collateral damage" to Elf's African clients as well as the president's son Jean-Cristophe, who handled African affairs at the Elysée Palace.

This was the first time Mr Mitterrand had been overtly linked to corruption at Elf during the trial, although the group's top appointments were approved by him.

Mr Le Floch-Prigent claimed Mr Mitterrand told him: "Get on with it and settle the problem". This, he understood to be the go-ahead "to settle the divorce with secret funds."

On the broader issue of where Elf's secret funds went, Mr Le Floch-Prigent has admitted he knew of a "black box" containing some $5m a year. Nevertheless, he said he knew nothing about how the contents were used.

That task was in the hands of Mr Sirven and André Tarallo, head of Elf's Gabon subsidiary and the company's principal contact with African leaders, who is accused of corruptly handling €35m.

Neither man has yet been forthcoming about the money trail. Mr Tarallo has been the more explicit, claiming at one point that in 1990 President Bongo feared he was about to lose French backing for his long-standing authoritarian rule and needed a "savings bank" as insurance against losing power.

The trial is in its early stages, and evidence about Elf's dubious foreign operations is expected to be heard throughout May.

This could yet throw light on kickbacks paid by Elf over a deal between Mr Mitterrand and Germany's ex-chancellor Helmut Kohl to invest in the Luena refinery in East Germany - an affair which helped bring Mr Kohl down.

Also under scrutiny will be oil contracts in the North Sea and Venezuela and the purchase of Spanish group Ertoil.

But many observers will be watching most keenly for more folies des grandeurs.