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Monday, November 17, 2003

First World Criminals, Third World Crimes - Part 2: France's Heart of Darkness: The ELF Story.

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Loik Le Floch-Prigent


On November 13-14, 2003, the former CEO Loik Le Floch-Prigent and 22 other former executives of France’s Elf Aquitaine, plus seven other accessories, were sentenced by a French court to a few €millions in fines and no more than 5 years apiece in jail –- 14 of the accused got suspended sentences -- on charges that they had embezzled €300 million ($346.8 million) from the company from 1989 to 1993. These sentences, the culmination of an investigation that started in August 1994, determined that most of these thefts had been skimmed from secret slush funds managed out of Switzerland, Luxembourg, and Liechtenstein.

From our standpoint, the key fact is that these secret funds had originally been created in order to pay up to $130 million of bribes a year to senior officials in African countries like Gabon, Congo-Brazzaville, Cameroon, Angola, Guinea, and the Congo, as well as in Venezuela, Russia, Taiwan, Central Asia, China, Uzbekistan, and Kazakhstan.

Significantly, this extraordinary global corruption eventually “blew back” to France itself, where, according to Le Floch-Prigent, Elf paid at least €5 -€20 million in bribes per year to France’s leading politicians, ministers, and political parties -- not only Gaullist parties like Chirac’s RPR/UMP party, and former Interior Minister Charles Pasqua’s RPF, but also the Socialists and other parties.

Even after this extraordinary 9-year trial, we still lack much of the detail on precisely where all this payola went. However, as usual, some things can be said.

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de Gaulle and Chiraq


To begin with, it appears that most of Elf's transgressions were committed with the knowledge and tacit or active approval of every French President from Charles de Gaulle on down to Chirac, after de Gaulle created Elf and the original “black box” system in the 1960s.

In addition to these domestic political subsidies, Elf also paid out an extraordinary amount of personal payola to France’s political elite – including free airfare, sweetheart deals and payoffs for ex-wives and girlfriends, and fancy apartments. For example, when President Mitterrand's weekly golfing partner was threatened with losing his house near their favorite golf course, Elf bought the house and let him continue living there, all expenses paid.
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Francois Mitterand


Many of the key figures involved with these funds turned out to have top-level connections in the French government. After his stint at Elf ended in 1993, its former CEO, Le Floch-Prigent, was appointed by Mitterand and Jacques Chirac to serve as head of the state-owned utility Gaz de France and SCNF, the French National Railroad. Roland Dumas, President Francois Mitterand’s close friend and Foreign Minister in the 1980s, was convicted in 2001 of receiving Elf bribes in connection with an arms sales to Taiwan – though the conviction was overturned on a technicality in 2003.
Tarallo.jpegAndre Tarallo was a close friend and former classmate of French President Jacques Chirac (Ecole Nationale d'Administration, class of ’59), and an Elf employee since 1967.

From our standpoint, Tarallo is an especially important figure. During the course of his long career, he became known as Elf’s “Monsieur Afrique,” the “real boss of Elf-Afrique,” in charge of the company’s relationships with corrupt regimes all over Africa. Meanwhile, he also helped himself to $27 million worth of property, including a mansion in Corsica and one of the largest apartments in Paris. For all these efforts, 74-year old Tarallo received a four-year sentence and a €2 million fine.

This huge case has been nine years in the making. As it slowly wended its way to a conclusion, many cynics predicted that because the case is one of France’s most sensational corruption scandal ever,few convictions would ever be seen. However, mainly because of the perseverance of a handful of courageous judges and magistrates in France and Switzerland, the embezzlement charges ultimately stuck. But for evidentiary reasons as well as “pour raison d’Etat,” the French court limited the investigation to personal enrichment by Elf’s own officials. When it came to exposing the details of the many bribes paid in the Third World and the First, they drew a complete blank.
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Alfred Sirven

As noted, because of the sensitive nature of Elf’s payoffs, we are unlikely to ever learn the full story. Nevertheless, it is already clear from many other sources that Elf – France’s largest multinational company at the time, with owned refineries and gas stations throughout Europe, Africa and the West Indies -- became a cornucopia of global corruption. As Alfred Sirven, Elf’s second-in-command in the early 1990s, and the former head of Elf’s Geneva office, said at the trial this year, “I know enough to eliminate the whole French political class.” Or as the former CEO, Loik Le Floch-Prigent, said, “If the money sometimes ended up in an orphanage then I am very happy - but let's say it didn't always end up in an orphanage.”

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Gabon's Bongo


Among Elf’s many unsavory activities around the globe: (1) Elf developed incestuous, mutually profitable relationships with key African autocrats like Omar Bongo, Gabon’s ruler, the Congo-Brazzaville’s Sassou Nguesso, the Cameroon’s Paul Biya, PaulBiyaCameroon.jpg>

Cameroon's Biya

Jonas Savimbi, the Angolan rebel leader; Jose Eduardo dos Santos, Angola’s “Marxist” President; and Nigeria’s Sani Abacha.
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Congo's Nguesso


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Angola's dos Santos

For example, according to an investigating magistrate, $30-$50 million a year was placed in a secret bank account belonging jointly to Bongo and Tarallo, his close friend, and Bongo’s Presidential Guard was partly paid for by Elf. In Congo-Brazzaville, where Elf has lucrative refineries and other concessions, it supplied helicopters and financed arms supplies for rival leaders. In Nigeria, it reportedly paid bribes to secure a lucrative oil concession in 1995. All told, according to the French magistrate, Elf ran "a vast and opaque system aimed at paying commissions, via intermediaries, to certain African personalities.” saniabacha_and_kofi_annan.jpg

Kofi and Sani

fig. 3.1. Carlos Andres Perez.JPG

Carlos Andres Perez


(2) Elf allegedly paid $2.5 million in bribes to Venezuela’s President Carlos Andres Perez and other Venezuelan politicians in 1991-92, part of some $20 million in commissions that Elf was alleged to have spent in Venezuela.

(3) Elf allegedly made still more payoffs in China and Taiwan in connection with a 1991 arms deal – including millions of dollars that were allegedly paid to Zhu Rongii, the former Mayor of Shanghai who served as China’s Premier from 1998 to 2003, and to Foreign Minister Dumas, to secure their tacit approval for the deal. ZhuandClinton.jpg

Zhu Rongii and Clinton


These payments were reportedly made by Elf’s network in connection with the sale of six frigates to Taiwan by Thompson-CSF, another French company, in 1991. On this deal alone, the commissions reportedly totaled more than 30 percent of the $2.5 billion purchase price.

(4) Elf also allegedly made huge payoffs to Nadhmi Auchi, an obscure Iraqi-British billionaire who is reputedly Britain’s seventh wealthiest man, the largest shareholder in BNP Paribas, and – according to some – one of Saddam Hussein’s oldest cronies and private bankers. (They both took part in the attempted assassination of Iraqi leader Abdul Karim Qasim in October 1959.).
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Nadhmi Auchi


The Elf payoffs to Auchi, which he reportedly passed on to Spanish politicians and partly kicked back to Elf officials, were made in connection with its 1991 purchase of Ertoil, a Kuwaiti-owned oil refinery in Spain. Auchi, one of the 37 people charged by the French court, was given a two-year suspended sentence and fined £1.4 million, after having been found guilty of accepting illegal commissions from Elf worth $84 million.

(5) Meanwhile, back in the First World, Elf also allegedly paid at least €47 million ($54.8 million) in commissions to senior German ministers and a slush fund for former German Chancellor Helmut Kohl’s Christian Democratic (CDU) Party.

fig. 2.3. Dr. Dr. Batliner and Helmut Kohl.jpg

"Kohl and Liechtenstein Money Man"

These payments were made in connection with a corrupt privatization deal, Elf’s purchase of a chain of gas stations and the Leuna oil refinery in eastern Germany in the early 1990s. Elf received more than €1 billion in German subsidies to help it finance €2.4 billion cost of modernization costs for the refinery. Former Chancellor Kohl denied any involvement in the scandal, and German prosecutors were unable to make a case against him – especially after Kohl’s government destroyed millions of documents and two-thirds of its computer files during the three weeks after the CDU lost the 1998 German elections. However, one of those recently convicted in the November 2003 case in France was Dieter Holzer, a German lobbyist who had handled the refinery. He got 15 months in prison and was ordered to pay a €1.5 million fine and return at least €24 million in commissions.

  • A TOTAL REFORM?
Most of the alleged behavior listed above pertained to the period before Elf was privatized in 1994, and then merged with Total/Fina in 2000. So some have argued that the core problem here was that Elf was simply a corrupt state-owned bureaucracy, at the mercy of French politicians, and that privatization would fix the problem.

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However, it turns out that this “neoliberal” view of reform is extraordinarily naive. First, it usually take a long time to change corporate culture and interests. Second, as this recent 9-year Elf prosecution showed, even if senior executives are caught and convicted, the initial “loot” is so large, the investigations are so lengthy and complex, and the ultimate jail sentences and fines for such white collar crimes are so modest under present laws, on a “net present value” basis, crime really does pay quite handsomely.

So it should not be surprising that misbehavior by Elf and its new parent Total S.A. appears to have continued long after privatization. For example:
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Nazarbaev and Clinton<


(6) Total S.A. has recently been implicated by the US with participaitng with five other leading oil companies – including ExxonMobil, BP, and Royal Dutch Shell – in a consortium that allegedly paid millions in illegal bribes to Kazahkstan’s President Nazarbaev and former Prime Minister Balgimbaev in the late 1990s, to secure oil concessions.

(7) Elf and Total S.A. have also compiled an unsavory record of dealing with Burma’s SLORC/SPDC, one of the world’s most repressive military regimes. Together with Unocal and Thailand’s National Oil Company, in July 1992 Total struck a deal with the regime to exploit the Yadana offshore gas field, and to build a $1.4 billion gas pipeline across rebel territory to Thailand – with the help of forced labor. Throughout the 1990s, Total S.A. and Unocal were Burma’s largest foreign investors, with the pipeline and a related railroad accounting for more than a third of all foreign investment in Burma, and will provide the military its largest source of foreign exchange other than heroin. The “clean currency” provided by Total and Unocal to the regime helped Burma source mortars in Portugal and helicopters in Poland.

All told, then, what we have here is a clear demonstration of just how contagious corporate corruption can be -- and how it interacts with the power of the state to generate a long-term venal alliance that is extremely hard to unravel, once it is in place. From one standpoint, French justice worked -- after all, all these former Elf senior managers have at least been jailed and fined. But it took almost a decade to catch up with them, and apart from social disgrace, the actual fines and sentences they will suffer are relatively minor, compared with all the hundreds of millions still missing. Moreover, out of all the senior French officials who knew about Elf's behavior and tolerated or encouraged it, only one saw any jail time -- and his conviction was overturned on appeal.

Finally, perhaps the worst damage from this scandal has been suffered by the scores of developing countries where Elf/ Total has long used bribery to wield undue influence. While the names of those Elf bribed are still in many cases secret, we can be sure that this not only tilted public policy unfairly in Elf's favor; it also helped to spread corruption from the First World to the Third, and helped undermine the rule of law in these fragile environments.

So those who blithely criticize developing countries for having "corrupt governments" -- which many of them no doubt do -- might do well to remember the case of Elf. As this tale indicates, the fact is that for more than forty years -- and quite possibly still to this day -- the Government of France joined together with leading French corporations and banks, plus quite a few friendly bankers in Europe's top havens, and made it national policy to foster corruption throughout the developing world, in order to serve its own perceived national interests, and pocket a few bucks for influential insiders on the side. If this does not constitute "crime against humanity," the term has little meaning.

***

(c) James S. Henry 2003. Not for reproduction or other use without express consent from the author.

November 17, 2003 at 02:42 AM | Permalink

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I read this article some years ago - it give an interesting reason for the Kohl-Mitterand-Elf scandal.

http://news.bbc.co.uk/hi/english/world/europe/newsid_622000/622041.stm

Friday, 28 January, 2000, 14:04 GMT
Analysis: Scandal at the heart of Europe


Kohl and Mitterand worked for a united Germany


By Jonathan Eyal
The funding scandal that has engulfed Germany's Christian Democratic Union
is now threatening the country's entire political landscape.

There have been political scandals in Germany before, of course, usually
involving a clash between high morals and skulduggery, a sprinkle of senior
politicians, shady arms dealers and failed businessmen.

And they usually end by establishing a link between the award of lucrative
government contracts and the illicit financing of some party or politician.

So it may seem the present scandal which centres around Germany's former
Chancellor Helmut Kohl is hardly remarkable; indeed Mr Kohl fell foul of
legislation which he himself introduced in the wake of such a previous
misdemeanour.
But the current affair is more significant than previous scandals it
questions the integrity of Germany's entire political system, and reveals
some of the dealings between various European governments immediately after
the end of the Cold War.

Many of the allegations against Mr Kohl and some of his CDU associates are
yet to be proven.

But it is clear that illicit money was obtained, and it is fairly certain
that a connection between German and French middle-men facilitated many of
these transactions.

Given what we know about the political landscape in Europe during the early
1990s, when these dealings began, it is also fairly easy to work out their
main purpose: It was nothing less than to anchor a new Germany into a united
European continent.

Party discipline

Chancellor Kohl started his career as a provincial politician, and never
forgot his roots, retaining an obsessive interest in the appointment of
every CDU party official.

To some extent, Germany's federal structure, with its frequent elections,
dictates such an approach: The slightest mishap in one Lender can upset the
federal parliamentary balance, as Mr Kohl himself discovered towards the end
of his reign.

Kohl's priority was German reunification

But the former Chancellor wanted more than just party discipline; he created
a vast system of patronage designed to ensure unquestionable obedience. The
tactic worked: The CDU knew it was committing suicide when it went to the
last elections with Helmut Kohl at its helm.
But nobody dared challenge him and nobody was able to prevent Mr Kohl from
hand-picking his successor even after a crushing electoral defeat.

Slush funds may have been a necessary adjunct of this process, for they
provided Kohl with the ability of rewarding party branches according to
priorities which only the Chancellor decided.

There was an even more pressing need for these funds in the early 1990s: The
prospect of German unification.

The collapse of East Germany in late 1989 and the unstoppable process of
unification that followed, dictated an unusually high number of elections in
close proximity.

There were elections at all levels in West Germany, followed by the first
free elections in the East and, finally, all-German elections.

There was an even more pressing need for these funds in the early 1990s: The
prospect of German unification

All these events were bound to put intolerable strains on a party's
finances, but Helmut Kohl felt these pressures even more.
His Social Democratic opponents at the time publicly expressed doubts about
the wisdom of German unification, while in East Germany the old Communist
Party still controlled most of the funds and was the only organised
political movement.

Mr Kohl had to move fast to establish his party's structures in the East,
not only to defeat the Communists, but also make sure the Social Democrats
were trounced as well.

This was not simply a party issue. Mr Kohl fervently believed he enjoyed
only a brief window of opportunity; if the Social Democrats controlled East
Germany they could have halted German unification, or at least slowed the
process down.

The risk was that doubts would be raised in the minds of West Germans,
causing countries such as the Soviet Union and the United States to have
second thoughts.

Success therefore depended on speed, and on Helmut Kohl's ability to keep
power in the Western part of the country, while assuming control in the East
as well.

Kohl's priority

As far as the Chancellor was concerned, the end justified the means.

The man who deliberately lied to his public by promising that German
unification "would not cost a pfenning" (it has cost many hundreds of
billions of marks ever since) was hardly likely to have qualms about
accepting illicit funds in order to boost his party's structures in East
Germany.

The fact that he himself did not personally benefit from these funds was
sufficient; Mr Kohl genuinely believed the interests of the CDU and those of
Germany were two sides of the same coin.

It was in Mitterand's interests to see Kohl stay in power

And this is more or less what France's then President Francois Mitterrand
believed as well.
After a brief period when he tried to prevent German unification, he struck
a bargain with Kohl: This unification would take place inside a
tightly-bound Europe, and a monetary union would be established in order to
neutralise Germany's potential might.

Chancellor Kohl bought the deal; his German Social Democratic opponents did
not. Mr Mitterrand's worst nightmare was a united Germany which was no
longer ruled by Mr Kohl and which repudiated the deal he brokered;
preventing this from happening was worth any price.

We do not know if payments were personally authorised by the French
president. But he would have had no qualms in doing so, and his preferred
method was always to launder cash through state-owned firms.

The French oil company - then state-owned - which is now at the centre of
the scandal, clearly had government encouragement in buying property in East
Germany. Establishing French economic presence in the East was Mitterrand's
explicit aim.

High expectations

Germany's scandal will continue for some time, but its wider European
consequences should not be exaggerated.

It does not indicate that Germany is corrupt; the country was shaken
precisely because it expects high moral probity from its politicians and has
one of the most draconian party-funding regulations in the world.

Nor does it mean that the European unification process started with the
original sin of corruption and is therefore morally bankrupt.

Many Europeans instinctively knew for some time that dark games were played
behind the scenes during those heady days immediately after the end of the
Cold War. They have got the first proof of these games.

Nothing excuses what Helmut Kohl and his associates did. But the
extraordinary historic circumstances of their time in office do help explain
why otherwise honest individuals acted in the way that they did.

The author is Director of Studies at the Royal United Services Institute in
London


Posted by: George Papadakis at Dec 12, 2003 5:48:04 PM