Paribas chairman under investigation

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The chairman of Paribas, the French bank, was yesterday placed under formal judicial investigation following inquiries into allegedly false accounting at a Paribas subsidary.

Andre Levy-Lang has been told to appear in Judge Eva Joly's offices in the next few weeks. Paribas shares fell Fr5.5 to Fr268.5. on the news.

The inquiry relates to an investigation in 1991 into Ciments Francais, the French cement company, which was then a Paribas subsidiary. Judicial sources claim Mr Levy-Lang was an accomplice to the presentation of inaccurate accounts at the company. The inquiry centres on certain off-balance sheet operations. Paribas denies that its chairman was aware of these operations which enabled Ciments Francais to record a 1991 profit instead of a loss until October 1992.

Paribas sold the subisidiary to Italian group Italclementi for Fr6.6bn in May 1992.

After a due diligence process the Italian group discovered some off-balance sheet items and claimed Fr500m back from Paribas. Paribas took the loss in its accounts and filed for a civil suit in damages. The French group has always maintained it did not know about the off-balance sheet operations.

Paribas said neither its chairman nor anybody else at the bank had any knowledge of the disputed financial transactions until the audit in October 1992, five months after it had sold the company.

Under French law, being placed under formal investigation does not mean that the person has been charged. However, Judge Eva Joly is reported to be keen to establish to what extent Mr Levy-Lang knew about the operations.

Mr Levy-Lang had a meeting with the Ciments Francais' finance director in February 1992 to discuss the subsidiary's high debts. He then asked for a break-down of the debts but said the reply did not include the off- balance sheet items. Paribas says it established the group's 1991 accounts "with sincerity".

Ciments Francia chairman Pierre Conso was jailed in August on suspicions of insider trading. Paribas said it was unware of the operations as Mr Conso had hidden them for the company's auditors.