Warfare in the corridors of power
Watching the crowds whooping over François Mitterrand’s Socialist victory on the Place de la Bastille last May, recalling another long-ago French revolution, the thoughts of one Paris banker turned to envy. “You know,” he said, “I was pretty sure my own head would roll. But I thought that if there was anyone among us who could survive all right, it would be Pierre Moussa.” Indeed, as chief of France’s most powerful banking group, the Compagnie Financière de Paris et des Pays-Bas, known as Paribas, Pierre Moussa seemed rich in the kind of capital that every other businessman in the country at that moment yearned to claim. A known socialist sympathizer, he had the single asset that matters most in a country where nothing counts as much as who you know: he had friends in the new government. From his gilt office of mirrors, he blithely assured nervous stockholders that, if the bank was in fact on the Socialist hit list for nationalization, he had persuaded his cronies in the cabinet to spare Paribas’ massive international holdings. “I’m an incorrigible optimist,” he beamed.
Now, six months after Mitterrand’s new regime seized power, no one envies Pierre Moussa, who has suddenly become the charged symbol at the swirling storm centre of France’s nationalization drama. A fallen hero to one side and a victim of his own hubris to the other, he has emerged over the past month as both a scapegoat and a test case in a suspenseful scenario of secret stock transfers, government countercharges, hysterical headlines and vicious parliamentary name-calling. By sabotaging the government’s stubborn decision to swallow his entire intricate international Paribas pyramid, in a sabotage swiftly and surreptitiously carried out by essentially “emptying” it of its immensely profitable Swiss and Belgian subsidiaries, he provoked first the humiliation of his former socialist friends, then their wrath.
Shown up before the financial world for what one English commentator called their “tragic naïveté,” the Socialists promptly forced his resignation. Last month, the government slapped him with two charges based on unrelated exchange fraud investigations, which date back over a year and smack of nothing so clearly as sheer vengeance. With fist-waving fury, the normally affable prime minister, Pierre
Mauroy, denounced Moussa’s “emigré mentality”—a decidedly French slur likening him to royalists who fled the cherished 1789 revolution. In that tirade, the plot for taking state control of the largest bite of private industry and banking in any major Western nation1 since the Second World War suddenly turned from a romp of tranquil resignation into what the Paris daily Le Matin dubbed “open warfare.”
This month as the nationalization bill prepares to go before the French senate, where the opposition majority threatens to challenge it as unconstitutional, the battle is hardening on both
sides. With two rallying cries, the government let it be known that its time of negotiation and conciliation with business was getting the curtain: Justice Minister Robert Badinter, a lawyer famous as the underdog’s champion, urged his prosecutors to show no mercy to financial dodgers, and Finance Minister Jacques Delors struck terror into the veins of a citizenry that he lambasted for having “turned tax evasion into a noble art.” At dinner parties that have suddenly lost their glitter, the social crème de la crème now babbles about burying jewels in the château garden rather than entrusting them to a nationalized safety deposit box and begs visiting foreigners to smuggle cash out of the country. In the past three months, customs police have caught more than $4 million being hustled out in hand luggage—most of it at the Swiss border, some of it by bank managers themselves. But they judge this to be merely “the tip of the iceberg.”
Furious international stockholders in the enterprises to be taken over met behind closed hotel doors in London and Brussels in late October, mustering tactics to fight what they claim is the French government’s inadequate compensation. Some American evaluators estimate compensation to be from onethird to one-half of the stock’s real worth, despite the fact that the total reimbursement bill will run to at least $9 billion. One foreign banker dismissed it as “monkey money”—not cash, but 15-year French government bonds. As
stockholders threaten interminable draining lawsuits, the clash could spill over the national stage into courtrooms as distant as Bonn, Hong Kong and Toronto. It was, after all, Paul Desmarais’ Montreal-based Power Corp., a 2.5-percent shareholder in Paribas, that collaborated with Moussa and the American group, A.G. Becker, to pull off the Paribas stock switcheroo. Under the mask of a sleepy unknown Swiss holding company named Pargesa, with meagre capital which they promptly quintupled to $186 million, Power, Becker and a handful of smaller Paribas
shareholders orchestrated a Byzantine shuffle of shares between Paris, Geneva and Brussels worthy of some chess grand master. It ultimately spirited majority control of both Paribas Suisse and its Belgian affiliate, Copeba, out of the hands of the mother company—and hence the French government. If Power Corp. has since been determinedly avoiding comment on the subject, it may be because it still finds itself in a squeeze. Since Paribas holds a 20-percent share in Power, Desmarais is now left with a distinctly hostile minority force in his group: the very French government he succeeded in outwitting.
But Desmarais is not the only Canadian jostled by Mitterrand’s nationalization sweep. From the glassy towers of Toronto’s Commerce Court, the board of the Canadian Imperial Bank of Commerce (ClBCi has been watching the nationalization of France’s 36 private banks (four of the country’s leading banks were nationalized by former French president Charles de Gaulle in 1945) with a resigned but avid silence of its own. As a small (less than four per cent) shareholder in the largest of them, Crédit Commercial de France, it stands to be bought out by the French government under terms that Jean-
Maxime Lévêque, the vociferous Crédit Commercial head, derides as just over half of the stock’s real worth—a gap by which the CIBC could be losing nearly $5 million on paper. “But the bank is always very scared of bad publicity,” says a reticent unofficial spokesman. “We won’t fight because we don’t want any pressure on what is a very profitable operation in France.”
By embracing France’s main industrial groups—the electronic giant, Thomson-CSF, the nuclear contractor, Compagnie Générale d’Electricité, the two electrochemical leaders, RhônePoulenc and Pechiney Ugir.e Kuhlmann (PUK) and the generalized conglomerate Saint-Gobain Pont à Mousson—the Socialist government is putting its hands on their far-ranging holdings on foreign shores as well. In Canada, those tentacles reach from PFK’s stake in the Canadian uranium industry so essential to France’s nuclear energy program, to the Amok Ltd. mine on Saskatchewan’s Cluff Lake, the world’s richest uranium surface vein, with assets of $120 million.
Canadian diplomats have thus far been eyeing the controversy from a customary distance. “Our official view is that we don’t have an official view,” says one. But other foreign governments threaten a less disinterested stance. After Paribas’ Belgian shareholders, led by Jean Rey, a former president of the European Community, protested in Brussels, the Belgian foreign ministry hinted it might step in to defend its citizens’ interests. Even West German Chancellor Helmut Schmidt, whose banking captains led the London shareholders’ revolt, wrestled from Mitterrand the promise that the French pharmaceutical giant, Roussel Uclaf— still on the nationalization list to come—won’t be touched before negotiations with its majority shareholder, Germany’s pharmaceutical monolith Hoechst. Hoechst, meanwhile, has publicly vowed not to cede control. Says one international lawyer involved with the shareholder suits that could cost both sides millions and lost years: “It’s suicidal. Only the lawyers will win.”
The surprise is not the business community’s fury but that it comes so late. Lulled, in part, by the belief that Mitterrand wouldn’t keep his campaign promises, in part by reassurances from cabinet moderates such as Delors, who privately opposed the blanket takeovers, the French executive suite initially took the Socialists’ ascension to power with a wary yawn. What it failed to understand was that, as a history buff, Mitterrand saw nationalization not simply as a strategic tool to appease his party’s radical left wing and his Communist partners, but as a symbol of his mastery of the “international wall
of money” he blamed for undermining the French Socialists’ only previous fling with power in 1936.
Even when the inevitable became obvious, some still counted on their friendships in high places. To their shock, only the two major industrial groups essential to France’s defence industry—Dassault, manufacturer of the crack Mirage fighter jet, and Matra, the electronic octopus that turns out missiles—won concessions. Both were permitted to keep 49 per cent of their shares in private hands, though the state’s 51-per-cent bite is estimated to have cost $180 million.
There wasn’t the slightest capitalist quibble, though, about the take-over of France’s two leading steel groups, Usinor and Sacilor, which were already virtually nationalized when the previous government had been forced to bail them out three years ago. What raised the business community’s ire was the slow-dawning realization that the state would control an estimated 40 per cent of the nation’s industry and 95 per cent of its credit. Rages François Ceyrac, retiring president of the country’s employers’ association: “It’s useless, costly and dangerous.”
Even more frightening was the news that the nationalized-to-be could no longer draw comfort from the glowing model of the state-owned car manufacturer, Renault, which Charles de Gaulle took over in 1946, and which stands as one of the auto industry’s few current success stories. Industry Minister Pierre Dreyfus had assured the company chiefs that the state would keep the same arm’s-length relationship with their groups as it had with Renault.
But suddenly Mauroy was telling the National Assembly that the socialists not only saw nationalization as a tool to fight France’s record unemployment
(which topped two million—8.7 per cent—last month), but one that they wouldn’t hesitate to use. He would step in whenever profits were given top billing over good citizenship. Financiers froze at the prospect of being forced to create unnecessary jobs. Bankers balked at the thought of being pressured into undesirable but patriotic loans. In that climate, business silently cheered the Paribas scandal—what Mauroy termed Pierre Moussa’s “guerrilla warfare.” But it as quickly became clear it may have been a costly sabotage.
By charging Moussa, three Paribas officers and French aviation heir Pierre-Jean Latécoére with exchange fraud in transferring $5.2 million worth of Latécoére’s inherited gold coins to a Royal Bank vault in Edmonton in the summer of 1980, the government unleashed a dangerous new climate of ugliness which does not threaten to diminish soon. A week later, other charges against Paribas officials and 55 clients, involving an illegal currency network with Switzerland, were promptly laid, once again based on a year-old investigation, begun and dropped by the old
regime. Quipped one bitter banker: “It’s the new reign of terror.”
Latécoére has reportedly had a second nervous breakdown, and Pierre Moussa, only a few months ago named banker of the year by a prestigious international newsletter, now faces the possibility of enormous fines or a fiveyear prison sentence. Devastated, he has withdrawn behind the closed shutters of his apartment overlooking the Seine, leaving below the spreading ripples of bitterness and betrayal that mask the growing chasm between the French government and the business community.
Indeed, Pierre Moussa was not the only one who mistook himself for the Socialists’ darling, only to awaken to a brutal disappointment. In late October, Baron Guy de Rothschild, figurehead of the legendary financial dynasty in France, took to the pages of the Paris daily Le Monde to pen, with bitter grapes, an obituary for the bank that bears his name, which had just been nationalized. Entitled Adieu, France, it was a signature as rare and elegant as one of his family’s Grand Cru vintages over prose that was acid and elegiac. “They didn’t aim for us,” he wrote. “But they hit us as in a hunting accident caused by men to whom the French have had the thoughtlessness to entrust their guns for awhile.” Having already lost all once to the Nazis in the war, the baron railed as one who had rebuilt, only to see everything snatched away again, this time by the very people he may have helped to power. As leader of France’s Jewish community, he had been one of those influential in protesting former president Giscard d’Estaing’s Middle East policies and agitating for his downfall. Anguished, the baron explained his article: “One doesn’t let the fruit of 40 years’ work be torn away without protesting. The eggs they’re breaking have the right to bawl. Having been forced to retire, I’m now going on strike.”