PARIS--France Telecom SA (FTE.FR) Chief Executive Stephane
Richard was detained by police Monday morning for questioning as
part of an investigation into the possible misuse of public funds
while he was an official at the French Finance Ministry.
A spokeswoman for the Paris prosecutor's office said Mr. Richard
could be held for up to 48 hours while he is being questioned, as
investigators decide whether to put him under formal investigation
or release him.
A spokesman for France Telecom said Mr. Richard's detention "is
a normal measure in this type of investigation." He said Mr.
Richard's duties would be handled by France Telecom's deputy chief
executive and chief financial officer while he is being
questioned.
The detention of Mr. Richard is the latest twist in what is
often called "l'Affaire Tapie," a two-decade tale pitting French
tycoon Bernard Tapie against the French state. French investigating
magistrates are investigating whether officials at the French
Finance Ministry committed a criminal offense when they decided in
2007 to refer a dispute with Mr. Tapie to an arbitration panel that
ended up granting the French businessman 420 million euros ($555.2
million).
Socialist lawmakers, who were in opposition at the time, alleged
that the decision smoothed the way for Mr. Tapie to reap bigger
damages from the French Treasury than he would otherwise have got
in the courts as a form of thanks for his support for Nicolas
Sarkozy, a conservative, in his successful 2007 presidential
election.
At the time, Mr. Richard was chief of staff of then finance
minister Christine Lagarde. Ms. Lagarde, who is now head of the
International Monetary Fund, was questioned for two days last month
by magistrates about her decision to refer the case to arbitration.
She was named a material witness in the case and wasn't
charged.
Investigators are probing what role Mr. Richard had, if any, in
setting up the arbitration panel, according to a person close to
the inquiry. They have already informally questioned Mr. Richard,
and police searched his home in January.
Investigators have also questioned others who are potentially
involved in the case, including the head of the government entity
that ended up paying Mr. Tapie, as well as one of the arbitrators
on the panel, who is alleged to have had connections to Mr. Tapie.
Last month, investigators placed the arbitrator--Pierre
Estoup--under formal investigation for conspiracy to commit fraud,
but have yet to open formal probes into any other members of the
alleged conspiracy.
Write to Sam Schechner at Sam.Schechner@dowjones.com
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