Friday, June 4, 2010

Sarkozy involved in arms deal scandal with Pakistan

French President Sarkozy was caught up in a long-simmering kickbacks scandal yesterday when police in Luxembourg named him as the creator of a company that handled tens of millions of pounds in illegal funds.

An inquiry appears to implicate Mr Sarkozy in a case involving the sale of French submarines to Pakistan in 1994. It will strengthen suspicions of French investigators that money from the contract was funnelled to finance a 1995 presidential campaign managed by Sarkozy, who was then Budget Minister.

Two French judges believe that a dispute between France and Pakistan over unpaid commissions led Pakistani agents to bomb a bus carrying French-employed shipyard workers in Karachi in 2002. Fourteen people died in the attack, 11 of them French. The attack was originally blamed on al-Qaeda.

Last year Mr Sarkozy dismissed as fantasy allegations that money intended for secret commissions to middlemen during the sale of the submarines had been used to finance the 1995 campaign of Edouard Balladur. Mr Balladur, then the Prime Minister, was backed by Sarkozy in an unsuccessful race against Jacques Chirac.

After Chirac won, he halted further payment of the submarine commissions, it has emerged from the French inquiry.

A parliamentary investigation has determined that £80 million in commissions was paid by DCN, France’s naval shipyards, to middlemen in the submarine deal. At the time, such commissions were not illegal in France but kickbacks, known as “retro-commissions”, were.

Luxembourg police, working for the French judges, said that, in 1994, Sarkozy “directly supervised” the creation of a Luxembourg offshore company called Heine. Its purpose was to channel the secret payments.

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