Sarkozy accused of using Watergate-style tricks to muzzle the French press

'Le Monde' launches legal action against President, claiming he used security services to find insider who leaked information to paper

In a scandal having many parallels with the Watergate affair, President Nicolas Sarkozy was accused by France's most prestigious newspaper yesterday of illegally using the counter-intelligence service to muzzle the press.

Le Monde said that the President's office had deployed France's equivalent of MI5 like a "cabinet noir", or dirty-tricks operation, to uncover the source of leaks in the L'Oréal family feud and political financing scandal. The newspaper said that it had started a legal action against "persons unknown" at the Elysée Palace for breaking a century-old French law which guarantees the secrecy of journalistic sources.

Le Monde said that the French security service, the DCRI, had tracked down a senior figure in the Justice Minister's office as the source of embarrassing leaks to the newspaper in July on the so-called "Bettencourt-Woerth" affair. The official, a long-term aide of the Justice Minister, Michèle Alliot-Marie, had been forced out of his post and sent on a minor legal mission to French Guyana.

The Elysée Palace flatly denied the accusation. It said "the presidency of the Republic has never given the slightest instruction to any (state) service" to investigate leaks in the L'Oréal affair. Other newspapers had already reported, however, that the official, David Sénat, had been punished for leaking witness interviews in the Bettencourt scandal to the press.

Mr Sarkozy's government was also accused yesterday of acting illegally in another great French political soap opera of the summer: the clampdown on Roma immigrants from Eastern Europe. From President Sarkozy's viewpoint, the "Mondegate" saga may prove to be the more damaging of the two.

In a front-page editorial yesterday, Le Monde said that the Elysée had tried to cover its embarrassment in the Bettencourt affair – and to intimidate the press – by misusing the counter-intelligence services whose mission was to "protect the state". Le Monde also said that the Elysée had broken a law protecting press sources which had been strengthened by Mr Sarkozy's government less than a year ago.

The alleged witch-hunt for sources of embarrassing leaks in the Bettencourt affair implies that Mr Sarkozy has been far more rattled by the scandal than he likes to admit. The saga began with a family feud over the alleged abuse of France's wealthiest woman, Liliane Bettencourt, 87, who gave €1bn in cash and art works to a playboy photographer who befriended her.

Secret tapes of her conversations with advisers and the photographer, François-Marie Banier, were handed to the police and leaked to the press in July. The tapes also implied that Ms Bettencourt, the largest shareholder in the cosmetics giant L'Oréal, had been sheltered from possible charges of tax evasion by her links with the Sarkozy government.

It appeared from the tapes that Mr Sarkozy's campaign treasurer in 2007, Eric Woerth – now Employment Minister – had sought campaign donations from Ms Bettencourt. Mr Woerth had also sought a job for his wife.

A former accountant for Ms Bettencourt then told the press, and police, that the billionairess had given illicitly large donations to Mr Woerth for the Sarkozy campaign.

Both President Sarkozy and Mr Woerth rejected the allegations. A preliminary investigation was begun by the public prosecutor for the suburbs west of Paris.

Ms Bettencourt's financial manager, Patrice de Maistre, was interviewed by investigators and contradicted parts of Mr Woerth's story. Details of his confidential testimony appeared on the front page of Le Monde the following day, 15 July.

The leaks so infuriated Mr Sarkozy, Le Monde said yesterday, that the Elysée ordered an investigation by the Direction Centrale du Renseignement Intérieur. This is a new umbrella internal security organisation created by Mr Sarkozy two years ago because, he claimed, its predecessors had become too "politicised".

Sources in the DCRI told Le Monde that they checked the telephone records of all potential leakers inside government until they found the trace of a call from the reporter who wrote the story. The DCRI sources insisted that they had acted as part of their "mission to protect the state".

Opposition politicians said that this was a clear abuse of power. Aurélie Filippetti of the Parti Socialiste said that the misuse of security agencies and the muddling of state interests and personal interests were the hallmarks of the Watergate affair which brought down President Richard Nixon in the 1970s. Ms Filippetti said: "This is a new scandal worthy of Watergate, which we could perhaps call 'Woerthgate'."

Watergate, she might have recalled, was also a battle of wills between a right-wing President and a "liberal" newspaper.

French FBI: Agency at heart of accusations was created by Sarkozy

It is scarcely new for French governments to misuse the security services for political purposes. The accusation is, however, especially damaging for President Sarkozy.

Two years ago, he transformed the landscape of counter-intelligence and internal security in France by ordering a shotgun marriage between two competing agencies.

His official argument was that efficiency demanded a single organisation which would become a "French FBI". His real reason, it was said, was he suspected one or both of the old agencies had been used by his enemy and former mentor, President Jacques Chirac, pictured, to try to wreck his rise to power.

Mr Sarkozy suspected they had played a part in dirty tricks such as leaks about his failing second marriage in 2005 and the Clearstream scandal, an attempt to smear Mr Sarkozy as financially corrupt in 2004. Creating a new agency would, it was suggested, separate counter-intelligence from internal politics.

There were other arguments for reform. The old agencies had long fought each other as fiercely as they fought any of France's presumed enemies.

The Direction de la Surveillance du Territoire was in charge of counter-espionage. The Direction Central des Renseignement Généraux was a more shapeless agency in charge of everything from spying on French "subversives" to running private opinion polls and the control of horse racing.

From 1 July, 2008, the two agencies were merged into the Direction Centrale du Renseignement Intérieur (DCRI) in a new building just north of Paris. The first director of the new agency is Bernard Squarcini, known as a Sarkozy loyalist.

The DCRI's mission is to fight against espionage, subversion, terrorism and "any act which seeks to weaken the authority of the state, national defence or the economic well-being of the nation."

Which one of those categories covers leaking embarrassing information to the press is unclear.

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