Funding scandal from Sarkozy's past returns to haunt him

Investigation into misuse of cash from two decades ago threatens to derail re-election campaign


A two-decades-old financial scandal threatens to engulf the former French prime minister Edouard Balladur – to the deep embarrassment of his former lieutenant, Nicolas Sarkozy.

New evidence emerged yesterday linking President Sarkozy to an off-shore company created in 1994 to handle commissions on large French arms sales to Pakistan and Saudi Arabia.

The commissions, paid through a company in Luxembourg allegedly created by Mr Sarkozy as budget minister, were not illegal at the time. It is suspected, however, that cash kick-backs were paid on the contracts – secret commissions on commissions – to fund Mr Balladur's failed 1994-95 campaign for the presidency.

Investigations by two examining magistrates have crept closer to the retired Mr Balladur, 82, in recent days. Two former senior officials in his campaign have been arrested and questioned by magistrates. One, the former culture minister Renaud Donnedieu de Vabres, was placed under formal investigation for "embezzlement" just before Christmas.

Last September, two longstanding friends and associates of Mr Sarkozy, including Nicolas Bazire, the best man at his wedding to Carla Bruni in 2008, were accused of "receiving embezzled funds" as part of the same probe.

Yesterday, the transcript of a witness interview conducted by the magistrates was leaked to the newspaper Libération. A former senior official in the French naval dockyards, Philippe Menayas, told the magistrates that Mr Sarkozy, as budget minister, had authorised the creation in 1994 of an offshore company in Luxembourg called Heine. The equivalent of £18m was paid by the Direction des Constructions Navales to Heine in 1994-95 as commission on two large French arms sales to Saudi Arabia and Pakistan.

Payments of this kind were legal in France until 2000 but the magistrates suspect that part of the cash was illegally "kicked back" to the Balladur campaign. Mr Sarkozy was also the spokesman – and de facto manager – of Mr Balladur's unsuccessful presidential bid. No direct evidence has emerged, however, linking him to kickbacks or other illegal campaign funding.

The examining magistrates, Renaud van Ruymbeke and Roger Le Loire, are expected to extend their investigation to Mr Balladur, who has denied the allegations, in coming weeks.

With only months until the next presidential elections, the affair is potentially damaging for Mr Sarkozy. He has managed to distance himself from the financial and political chicanery long associated with Jacques Chirac and other figures on the French centre-right.

In the past two years, a series of allegations have surfaced connecting Mr Sarkozy to illegal campaign funding in the past. The Elysée Palace has dismissed all the allegations as baseless and politically motivated.

The accusations surrounding the Balladur campaign are especially explosive. After Mr Chirac won the 1995 presidential election, he froze the Pakistani and Saudi commissions, allegedly to punish his old friend Mr Balladur for running against him. It is alleged by two other magistrates that this led indirectly to a "terrorist" attack on a bus in Karachi in May 2002 in which 14 people, including 11 French submarine engineers, died.

Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
Life and Style
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Graduate Pricing Analyst - 6 months / 1 year analytical experience

£20000 - £25000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Year 2 Teachers needed for day to day supply

£110 - £130 per day + Competitve rates of pay: Randstad Education Reading: Yea...

Year 4 Teachers needed for day to day supply across the region

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Ye...

Nursery Teachers needed for supply roles

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Nu...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits