PARIS, 17 July — The French central bank governor, Jean-Claude Trichet, was charged with fraud yesterday, damaging his hopes of becoming the new “Monsieur Euro”, or head of the European Central Bank, next year.
Reversing the recommendations of the state prosecutor, a magistrate sent Trichet, 59, for trial on charges that he falsified the accounts of the then publicly-owned French bank, Credit Lyonnais, in the early 1990s. The affair has some similarities with the scandals over false accounting in large private companies in the US which have shaken world financial markets in recent weeks.
Trichet, one of the most influential figures in European finance, is accused of helping to cover up a huge hole in the books of Credit Lyonnais when he was the head of the French treasury department in 1992-93. He will be tried with other bank and government officials in March next year at the earliest. Shortly afterward, EU governments must decide who should replace Wim Duisenberg as governor of the European Central Bank (ECB) in Frankfurt, the organization which runs the euro.
On the strident insistence of the French President, Jacques Chirac, it was agreed five years ago that the next “Mr Euro” would be a Frenchman and mostly likely Trichet. Paris insisted yesterday that its central bank governor was still its official candidate. However, this position would become untenable if Trichet is convicted of fraud or if his trial is not completed before the end of May when the ECB decision must be taken.
In that case, President Chirac could be said to have ruined his own candidate’s chances. It was the French president who insisted in 1996 — when he was at dagger’s drawn with Trichet — that criminal investigations into the virtual collapse of Credit Lyonnais in 1993 with hundreds of millions of pounds of losses should extend to public officials who supervised the bank’s finances.
Trichet, whose name means phonetically in French “to cheat”, is regarded by most commentators as a relatively minor player in the Credit Lyonnais affair, if he played any part at all.
As head of the treasury department in the Ministry of Finance, he approved accounts for the imprudent and struggling, state-owned bank which, it later emerged, had enormously inflated its assets and earnings.
Trichet, and the then head of the Bank of France, Jacques de la Rosiere, who has also been charged, insist that they had no way of knowing that the books had been cooked. The French public prosecutor decided in May that it agreed with Trichet. It recommended that action against him should be dropped but sent de la Rosiere and other former public and Credit Lyonnais officials for trial.
The parquet is nominally independent of the government but there have been hints in the French media that pressure was brought on the public prosecutors to relieve France’s euro-embarrassment and clear Trichet. In any case, the independent, examining magistrate who has investigated the Credit Lyonnais scandal since 1996, Philippe Courroye, decided this week to exercise his right to overrule that decision. He insisted that Trichet should also be sent for trial. Such a decision is rare and creates an awkward legal situation.
The public prosecution service can appeal. Otherwise, it must go through the motions of prosecuting in court a man whom it believes should have been cleared. In these circumstances, Trichet has a good chance of being acquitted but possibly too late to rescue his chances of being Europe’s banker.
The affair has strange echoes of the Enron and other accounting scandals which have been shaking confidence in the US economy. It is alleged that Trichet and other French officials came under pressure to disguise the true scale of the expansive and disastrous investments of Credit Lyonnais, especially its ill-advised purchase of the Hollywood movie studio, Metro Goldwyn Mayer (MGM).
The whole story is replete with two-way, trans-Atlantic ironies.
At the time of the Credit Lyonnais disaster, American and British commentators said that this was typical of what happened when the state tried to run a private company. When the Enron and other scandals broke out, French commentators pointed to them as an example of the dangers of unregulated capitalism.
It is now alleged that, in both cases — public and private — officials tried to get out of trouble by hiding the truth.
One vast difference is apparent, however, as the French newspaper Le Monde pointed out yesterday.
The first prosecutions in the Enron affair have already concluded, five months after the scandal broke. In France, almost ten years after the Credit Lyonnais disaster, the legal investigation has only just concluded. (The Independent)