Sarkozy gets imbroiled in Karachi-gate corruption scandal

[ejazr]

Pressure grows on Sarkozy over Karachi kickbacks | Reuters

(Reuters) - A corruption investigation is circling closer to President Nicolas Sarkozy as a third ally comes under pressure in the so-called "Karachi Affair", accused of alerting a friend in police custody to secret witness testimony.

A preliminary judicial inquiry opened on Friday into the leak after French media reported that presidential adviser Brice Hortefeux had told Thierry Gaubert, another Sarkozy ally, about secret testimony made against Gaubert by Gaubert's wife.

The implication of Hortefeux, a former interior minister in Sarkozy's conservative government, has intensified focus on the sprawling Karachi Affair, a corruption case linked to arms sales and a deadly bombing in Pakistan in 2002.

Sarkozy's office issued a statement this week, seven months before he is expected to run for re-election, saying he had nothing to do with any aspect of the case.

While there is no direct legal risk to Sarkozy, who cannot be prosecuted in office, growing interest in the case could crimp a meagre revival in his poll scores as it spreads to another of his allies.

The Karachi Affair refers to an investigation into a 2002 Karachi bombing that killed 15 people including 11 French nationals. Investigators suspect the bombing was a reprisal for former president Jacques Chirac's decision to stop paying commissions to Pakistan on submarine sales.

Judges suspect a number of French conservative politicians received kickbacks from the sales and used the proceeds to help to finance Edouard Balladur's 1995 presidential campaign.

SUITCASES OF CASH

Sarkozy was budget minister under Balladur and spokesman for his campaign.

The investigation opened on Friday by a Paris judge will seek to determine how the secret testimony linked to the Karachi Affair was leaked.

Hortefeux, Sarkozy's interior minister until February, denied media allegations that he had known details of the witness report before they were reported by French media, and offered on Friday to speak to a judge about the alleged leak.

"This is a direct intervention by an adviser to the president, a member of the executive branch, to hamper the search for truth. It's very serious," Olivier Morice, lawyer for the Karachi blast victims' families, told RTL radio.

Gaubert and another Sarkozy ally, LVMH executive Nicolas Bazire, were placed under investigation this week on suspicion of handling kickback cash from Pakistan. Gaubert and Bazire both deny wrongdoing.

Hortefeux's denial followed a report in the centre-left daily Le Monde describing a conversation between him and Gaubert when the latter was in police custody in early September.

According to a leaked police transcript of a recording, quoted by Le Monde, Hortefeux spoke to Gaubert by phone shortly after Gaubert was taken in for questioning. Hortefeux allegedly told Gaubert that Gaubert's wife Helene was speaking to investigators about his role in the case.

"Apparently, she's blabbing quite a lot, Helene," Le Monde quoted Hortefeux as telling Gaubert.

The wife, a royal heiress known in France as Helene of Yugoslavia, said she had testified to police that her husband had made trips abroad in the 1990s and returned home with suitcases full of cash.

"I confirm what I said, about my husband's travels, especially abroad, and the fact of coming home with suitcases," she told Europe 1 radio.

Sarkozy's office on Thursday said he was not mentioned anywhere in the investigation and allegations against him were "imaginary". It also said he had had nothing to do with the financing of Balladur's presidential campaign.

As the presidential election nears, political opponents are unlikely to let the Karachi Affair fall from public view.

"If the president is in good faith, if he considers that he really has nothing to hide, why not declassify (key files in the case)?" Jean-Marc Ayrault, head of the Socialist group in the National Assembly, told the news channel iTele.

 

[ejazr]

More bad news for Mr. Sarkozy, but just focussing on the Karachi Affair info in this foreign policy article

French Presidential Election: Will Nicolas Sarkozy Stumble? - By Eric Pape | Foreign Policy

Worse, the senatorial results also happen to be perfectly in line with popular sentiment toward the president. Sarkozy's meager approval ratings -- generally just one voter in three supports him -- have hardly budged in 18 months, their steadiness in stark contrast with the turbulent mountains and valleys etched on European stock market graphs.

The French electorate is notoriously mercurial and pessimistic, but this moment is especially bad. Sarkozy's predecessor, Jacques Chirac, endured lengthy periods of disapproval, but the French are far more troubled now than they were at any time during his 12-year presidency. Nearly nine voters in 10 are worried about the state of the country, and more than three in four are concerned about their own economic situation. Two in three fear for their own job or that of someone close to them. Such sentiments are significantly direr than they were at the peak of the 2008 financial crisis or prior to the country's overwhelming take-this-European-Constitution-and-shove-it vote in 2005.

On top of the bad election results, just last week two Sarkozy intimates -- including the best man at Sarkozy's 2008 wedding -- were charged with misuse of public funds in what the French media call the "Karachi Affair." A French court is looking into whether kickbacks from a sale of military submarines to Pakistan in the 1990s funded the 1995 failed presidential campaign of Édouard Balladur, prime minister at the time. Sarkozy had been budget minister from 1993 to 1995 under Balladur and was also his campaign manager, though the Élysée Palace denies that Sarkozy had any authority over the financing of that campaign.

The Karachi Affair isn't just about cash-stuffed suitcases. A 2002 terrorist attack in Pakistan's largest city killed at least 14 employees of a naval defense company, most of whom were French, on their way to a Pakistani dockyard to work on one of the military submarines in question. Some have brought up the possibility that Pakistani authorities orchestrated the killing as a long-distance retaliation against the French for cutting off kickbacks to officials there.

Amid this swirl of accusations, investigations, and prosecutions, the government unveiled its proposed 2012 budget on Sept. 28. It includes 3 billion euros in tax increases on everything from sugary soda drinks to individuals who earn more than a half-million euros annually (thus nullifying part of the president's signature tax cut). It also includes a wide array of spending cuts that, more than three years after the start of the global economic crisis, are sure to inflict more pain on the Average Jean on the street.

The goal is to bring France's budget deficit in line with EU limits by 2013. If Sarkozy succeeds in keeping his promises to Brussels -- and given shrinking economic growth forecasts, that's a big if -- he could garner kudos from the European Commission and stock markets. But they aren't going to be voting in the election next spring.

Given the circumstances, what sort of arguments can the French right put forward to eke out a victory? For now, scare tactics and, apparently, even redbaiting. Nadine Morano, a junior minister to the minister of labor, employment, and health, said in a Sept. 29 TV interview that France's credit rating would surely be "downgraded within a week" if the Socialists won the presidency. The Socialist candidates, she asserted, have a political program that is worthy of the "Soviet Union," ripe with state-driven economic proposals that are "resolutely turned toward the past." Unfortunately, she doesn't seem to realize that most French people see little these days that is more appealing.