Chapter I - The Fabrication of an Affair
volo, sic jubeo, sic pro ratione voluntas.
I want it, I order it, my desire takes over the place of reason.
Juvénal (Satires VI)
The affair began by an incident that was certainly regrettable but not unusual in the life of a business enterprise. In the spring of 1993, Alcatel CIT, one of the French subsidiaries of the Alcatel Alsthom group, was alerted by the police to the abnormal life style of one of the senior executives at the company’s Villarceaux site near Paris. The person involved was Mr. José Corral, the finance director of the plant and of the division that made and sold the transmission products of this subsidiary. A quick investigation revealed embezzlements committed by this employee and his accomplice, Mr. Antonio Léal, head of maintenance services. These two men arranged to overcharge maintenance work at the factory and systematically to have that work performed by companies in collusion with them and to receive kickbacks from those companies. They had, directly or with the aid of family members, personally taken equity interests in certain of the companies. Their activities had been carried out over several years and Alcatel CIT estimated the damage at several tens of millions of Francs.
As soon as the facts were established, Alcatel CIT fired the two culprits. And the company joined as a civil plaintiff in the judicial procedure commenced at the initiative of the Office of the Public Prosecutor. Several weeks later we were approached by the attorney of José Corral and he made allegations that were tantamount to blackmail. According to him, his client had a file of extremely damaging information against Alcatel CIT that he was planning to give to the investigating judge if the company did not withdraw its complaint. Out of principle, and in any case having a perfectly clear conscience, we refused without hesitation.
Several weeks later we discovered to our surprise what this was about. It was the beginning of the affair regarding alleged overbilling.
To understand the nature of the accusations (or, at least, purported accusations) that the judicial investigation would develop, we need to return briefly to the practices used by the French government in purchasing equipment. Traditionally the PTT (Post, Telephone & Telegraph, later to become known as France Telecom) was an agency of the Government. On January 1, 1991 its status changed. On that date it became a commercial enterprise owned by the Government. However, before this change of status it was subject to the government contracting code—specifically, what was called the “cahier des clauses administratives générals des marchés industriels (CCAGMI).” This text set out, in Article 223 of the Code, which followed Article 54 of the Finance Law 63-156, a specific procedure to “audit the cost plus price” when, for technical reasons, only one company is qualified to bid on certain contracts. The PTT administration would purchase products from the equipment provider pursuant to a mutually agreed contract extending over a period of several years. Among other things, this contract provided for a price which resulted from a commercial discussion, with the analysis of the cost plus price being one of the elements considered by the negotiators.
The administration had few French suppliers—three for transmission products and two for switching products. This concentration is explained by the highly technical nature of this industry, which required very expensive research and development. The “audit of the cost plus price” was made by a specialized department of the administration alternately among the suppliers every five or six years for each one. The methodology used by the personnel of the administration in these audits was defined by the texts and, in practice also by routine audit procedures that were followed. In over simplifying, the evaluation of the cost plus price was made in two steps: First, for a given period, the auditors determined the quantities of materials used and the number of work hours required for the manufacturing in order to establish the direct manufacturing cost. Next, the auditors analyzed “general elements of costs (EGC)”—that is, the cost of studies (commercial, general or other) which were not directly proportional to the activity but were indispensable to the life of the enterprise. Added to the direct costs, these EGC costs made it possible to determine a purchase price for the administration, from which, by deduction, an estimate of the profit could be made.
This method for price audits was declared illegal several years later by the Conseil d’Etat in a case brought by the armament industry. The Conseil d’Etat determined in particular that the administration could not impose on its suppliers a restrictive definition of general expenses. This determination of illegality, which took place after the events for which Alcatel was charged, could not interrupt the investigation that had been opened. However, according to an eminent professor of public law, the invalidity of a procedure already commenced could, with a great chance of success, be invoked at the beginning of the trial, because the illegality determined by the Conseil d’Etat extended ipso facto to the earlier text that accorded the same prerogatives to the administration and on which the judge based his case to allege the overbilling.
In any case, from January 1, 1991 this administrative regime was no longer available to France Telecom for its purchases. By letter dated January 15, 1991, the CEO of France Telecom informed Alcatel CIT of this, as follows:
On January 1, 1991 France Telecom became a purchaser no longer subject to public procurement law.... This change of status leads to a modification of its relations with its suppliers. Henceforth, the latter are governed by the civil law, with, as a consequence, the adoption of contracts governed by civil law.
The new regime was the subject of a contract between France Telecom and its suppliers. This agreement gave France Telecom access to the accounting records of the supplier and gave it the right to analyze those records.
The investigation of judge Jean-Marie d’Huy concentrated on the audits conducted by France Telecom at Alcatel CIT in 1988-1989 for transmission products and in 1991-1992 for switching products, and so were based on two very different legal regimes. During his investigation the judge strove hard not to see this difference and, deaf to all denials of those who were indicted, he based his charges on an erroneous analysis of the legal context. The dismissal of the case that would come 12 years later confirmed this.
The “extremely damaging” file that José Corral submitted to the judge consisted of documents that he had prepared for France Telecom’s audit of the prices of transmission products in 1988 and 1989. Mr. Corral had prepared for submission to the administration’s auditors documents that increased the quantities used in the manufacturing, but in fact decreased the overhead expenses, in order to arrive at the complete cost plus price. The volume of business with France Telecom was decreasing at this time, and the administration agreed to take into account the exceptional costs that resulted from this for the company. All in all, it would seem that the resulting cost plus price was not greater, in fact it was less, than the prices that would have resulted from a strict application of the regulations prescribed by the administration.
Mr. Corral claimed that he had followed the instructions of senior management. That management stated to the contrary that Mr. Corral acted at his own initiative and that he no doubt did it in order to establish a way to exert pressure on his employer if his embezzlement were discovered. One has to wonder what advantages senior management could have hoped to obtain from José Corral’s price negotiations with the administration by his putting on the table falsified documents that resulted in a reduced cost plus price! On the other hand, the blackmail attempt was indeed made and we learned that a copy of the file had been given by Mr. Corral to a friend who was an inspector of the Domestic Intelligence Agency. At what date did this occur and for what reason? The judge was not interested in these questions, which naturally come to mind.
It seems, moreover, that the relations between José Corral and the investigating judge became, at this point, very subtle, if not to say ambiguous. Mr. Corral, by his false statements, was going in a direction that suited the judge. We will see later that he was “luckily” rewarded when the case against him was surprisingly dismissed by the judge in 1999!
José Corral stated to the judge that it was widespread practice at Alcatel CIT to allow work to be done, at the company’s expense, at the homes of senior executives. Antonio Léal was prompted to make the same statements. However, the latter declared at the hearing that in fact he knew nothing about it, but “he had been requested” to make those statements, something that he then regretted. My name, as well as that of Pierre Guichet, President of Alcatel CIT, was cited.
It was on the basis of these statements that the judge undertook to verify all the payments that I had made over the past twenty years for work in my various apartments, as well as in my secondary residence. Experts were designated. All the companies that performed work were examined, as well as my income and my past financial accounts. I remain amazed at having to find and submit to the police documents supporting these payments for work, some dating back twenty years.
I was brought in by the judicial police of Versailles on July 4, 1994 at 9:30 am and spent the day in custody. My apartment and my offices at Alcatel and at Alcatel Alsthom were carefully searched in my presence. None of the documents reviewed raised any suspicions for the investigation and none were seized. Towards the end of the afternoon I was taken back to Versailles and the interrogations resumed. The ambiance, more relaxed than in the morning, became practically friendly the more time passed and as the judge sent by fax new questions to ask me. Each of the questions asked for more details on the payments made for the work performed in order to confirm that I had in fact paid from my own funds for the personal work and that those relating to the security system requested by the Minister of the Interior had been paid by the company.1 Each time the interrogation recommenced with the formalism that the procedure required, the minutes were typed, signed and sent by fax to the judge in Evry. Then there would be a break, a sandwich, perhaps a beer, then more interrogations at the arrival of the next fax. Around 10 pm the police captain began to show his exasperation with the maneuvers of the investigating judge. In front of his colleagues who had questioned me all day, he said loudly: “The judge is trying to drag this out in order to oblige us to keep you overnight, something I will not do.”
Around 11 o’clock at night it was decided to take me to the investigating judge at Evry. To avoid the journalists, the police, apparently very used to this, had several cars leave through the main gate with their sirens blaring, while I left silently through another door escorted by two police officers. After my arrival in Evry, the judge notified me, after several minutes of interrogation, that I was being indicted for the misuse of corporate funds and benefiting from stolen property.
The judge accused me of not having paid personally for the work done in my apartment in spite of all the proof of payment that had been provided. He based his case solely on the accusations of José Corral and Antonio Léal, not having any proof to support their accusations and not giving any credit to the responses and proof furnished. In accordance with a procedure that I regularly endured later, my depositions filtered to the press, but always only partially and in a biased fashion. After my indictment I held a press conference. My message was simple: I paid from my own funds for all the personal work performed at my home and the company paid for the security equipment that the Minister of the Interior had requested to be installed in order to ensure the protection of persons that he considered to be threatened at their homes, as well as at their office and during their travels. Michel Rocard and Jean-Pierre Chevènement, the Prime Minister and the Minister of Defense, respectively, at the time the events took pace, would, several years later, confirm this in writing for the Cour d’appel.
This did not prevent a very malicious campaign by certain of the media which fiercely denounced the luxurious work that the CEO had his company finance for his personal comfort, grotesquely referring to his bathroom in marble with faucets in gold and his mansion in Neuilly. The campaign evidently worked. Several years later, when I was waiting in New York for the Air France departure to Paris, a passenger approached me and said he was in the process of purchasing my former mansion in Neuilly. He seemed very disappointed when I told him that I never had a mansion in Neuilly or anywhere else!
Blandine Hennion of the daily newspaper Libération particularly stands out for her fierceness, as well as for her hurry to relay everything that was said by the “source close to the investigation.” She even went so far one day as to publish an article entitled “Pierre Suard, has he taken liberties with his judicial control?” The subject of her ire was my presence at an electoral meeting attended by two or three hundred people, among whom she had noticed one of the indicted persons with whom I had been forbidden to meet and who I had not seen in the crowd. Finding it strange that a journalist would react in this situation, I wrote to Serge July, editor of the newspaper, to ask him if he had the same reaction, which reminded one unfortunately of the period when “the good French” were incited to denounce to the authorities their neighbors who did not wear the yellow star. “Does that appear to you to conform to the code of ethics of a professional journalist? I would like to know your personal point of view,” I stated. I had difficulty obtaining a response. The one that I finally received showed a certain embarrassment.2
Experts were designated to analyze the work done in my apartment and the payments for it. The financial accounts of all the enterprises performing the work—about twenty—were audited. The managing director of one of them told me that the police noted that he had made a profit on the work. They said that was great for him because he would now avoid a more detailed investigation. Only one enterprise avoided these investigations. I learned later that it had been paid cash (to avoid being taxed on it) for work done for a member of the Tribunal d’Evry. A simple coincidence!
At the beginning of August, the press—further supplied with information by the “source”—increased the pressure: “An expert’s report contradicts the CEO,” it said. In fact, the report that I received in the following days confirmed what I had stated and concluded: “Insofar as the security work is concerned, the investigation reveals that it had been paid for by the Alcatel Alsthom Group; the investigation did not reveal any other anomalies concerning the work at the building.”
Another day the press indicated that the judge raised another “awkward question.” I deposited in a tax haven the capital gain that I received on the exercise of my stock options! The truth is just the opposite. It involved the application of a stock option plan in which 80 Alcatel executives of different nationalities participated. Alcatel was a private company and its stockholders, also of different nationalities, wanted to be able to buy, in proportion to the capital that they held, the shares created by the exercise of those options. To minimize the problems posed by the execution of the plan, the lawyers had recommended the creation of a Bermuda company. That company would buy the shares of the optionees, who in turn would receive an ordinary payment from Bermuda. Insofar as I was concerned, I deposited the funds in my checking account in Paris, where it clearly appeared. The judge had no basis for raising the question about these stock options, not least because I had naturally declared the capital gain in my tax return. No denial of course was ever published!
In parallel, the investigation continued on the overbilling in the transmission area and the press, regularly informed by “a source close to the investigation,” maintained its systematic campaign of denigration of Alcatel CIT and its executives.
In October there was a sudden and spectacular new development. Denis Gazeau, a former accountant who had just been fired by Alcatel CIT, spontaneously declared to the police of Versailles, then to the investigating judge of Evry, that the overbilling of France Telecom was also systematically carried out in the switching area, and in even larger amounts. He even indicated the amount involved as several billions of Francs over three years. The categorical denials of the company and its management were for naught. Pierre Guichet, the President of Alcatel CIT, was even jailed, but happily freed by the Chambre de l’instruction eleven days later. The press became hysterical. “The Alcatel Alsthom group is plunged into a new storm” was the title of an article in the November 23 issue of Les Echos. And again Blandine Hennion, in the November 30 issue of Libération, wrote: “How Alcatel CIT was doctoring its billing: The report that shows the mechanism for the overbilling of France Telecom.”
The incredible declarations of Denis Gazeau were so prejudicial to Alcatel CIT that we could not avoid making a connection with a signed statement that we had just received from London. That letter alerted us to some actions by a competitor (whose name was cited) of industrial espionage and commercial destabilization of which we would be the victim. We decided to take this information seriously and to proceed with some minimum investigations to verify its validity. In particular, we wanted to assure ourselves that Denis Gazeau would not be used, possibly without his knowing it, by a competitor. These investigations were discovered and misinterpreted, providing fodder for “the affair in the affair.”3
I was summoned by the judge on December 16 to be interrogated, I thought at least, on the facts leading to my indictment the previous July—that is, the payment for the work done in my home. However, I was questioned principally on the alleged overbilling of France Telecom. The press had announced this summons and predicted there would be another indictment. That was not the case, but being always well informed, the press added: “Pierre Suard saved the situation but this can only be a reprieve.”
I was again summoned by the judge the 10th and 14th of March 1995. The 10th of March the only subject of the interrogation was the surveillance of Denis Gazeau. But since the judge was inquiring about a matter for which he was not empowered, he had to, at the end of the afternoon, request a supplemental indictment from the Public Prosecutor, which was refused. After a short half hour suspension, the judge again took up the interrogation for a few minutes and, without the least embarrassment, the time it took to remove from his drawer a text prepared in advance, he notified me of a new indictment, combined with a draconian judicial control, for fraud and benefiting from stolen property to the detriment of France Telecom, facts on which he did not interrogate me during that session.
That day he forbade me from working for Alcatel Alsthom on the basis of his discretionary appraisal, officially for the “overbilling” of France Telecom, but in fact for the investigation of Denis Gazeau, a matter for which he was not empowered and which would later earn me an indictment for subordination of a witness. Whatever the real reason, the reader will see that the decision of the judge who justified that day his banning me from working would, 12 years later, be annulled by an acquittal and dismissal of the case against me. But the harm had been done and a major and irreversible sanction was imposed on me before there was any judgment. I had to leave Alcatel Alsthom. The Board of Directors then put the company in inexperienced hands. My professional life came to an end that day, as was the case with most of my direct reports in the following months, and a hundred thousand employees would lose their jobs over the next ten years.
So in March 1995 the investigation opened two years earlier over the embezzlement of José Corral comprised for me three parts that I am going to examine successively: In this Chapter, the works at my apartment, then the “overbillings” in Chapter 2, and the surveillance of Denis Gazeau in Chapter 3.
The cause of action regarding the work in my apartment was considered as a different offense and was sent for trial in March 1997. In his order the judge presented the facts in a very biased manner, bringing together a so-called vast system of corruption that began with the works (those that concerned me and the other executives) at the top of the pyramid, and the embezzlement of José Corral and Antonio Léal, of which he practically made me carry the responsibility. He did not hesitate to write: “It is remarkable that the fraudulent behavior of the CEO of one of the largest French companies could ‘evidently give ideas’ to other executives of this company and blackened the image of the economic entity of which he was in charge and for which he had the responsibility.” The president of the Tribunal in the first hearing indicated that in fact there were two affairs which would be examined successively. At least this had the advantage of not obligating me to attend all the hearings that extended over a three week period.
I have already described in my book L’envol saboté d’Alcatel Alsthom4 the ambiance of this tribunal in a difficult suburb of Paris and the manner in which the debates were conducted. The press attended all the hearings and the timing was particularly well planned in order that the TV news programs could immediately diffuse the most eye-catching information. Thus, when the Public Prosecutor requested a jail term and not a suspended sentence, he did it at 12:45 pm, just in time for the 1 o’clock TV news. The day of the judge’s deliberations the TV cameras were authorized to film the room and the accused a short time before the hearing commenced. I therefore had the satisfaction, that same night, of watching myself for several minutes on the small screen, absolutely frigid because, fearing the malicious diffusion of a chance expression, I had to rest absolutely immobile and without any reaction while the pictures were being taken, which seemed to endure a very long time!
In the course of the hearings I was very surprised to note that our expert’s report had not been transmitted to the tribunal, though my lawyers and I had given it to the judge on December 16, 1994 during my interrogation. This report, prepared by an expert for the tribunal, set out the irrefutable proof that the enterprises that did work in my apartment and that I had paid, had only received, when they did work for Alcatel CIT, the amounts provided for in their contracts and that the payments had been made on the basis of the state of the work as established by an architect. This report also highlighted the errors in the amounts paid as they were determined by the judge’s expert. He had overestimated them by several millions of Francs! These errors were mentioned at the hearing, which didn’t prevent the Public Prosecutor, no doubt distracted at that time, to take up, in his final request for an indictment the higher amounts that he had already cited in his initial request for indictment. This error was not a minor one. The Public Prosecutor requested a jail term and not a suspended sentence because, according to him, these enterprises had been paid by the company for personal work.
The absence of this report from the file transmitted to the tribunal is far from being insignificant. My lawyers noted that the President of the Tribunal seemed to be unaware of its existence. In response to their question he invited them, after the hearing, to review with him the entire file transmitted to the tribunal. It was under those circumstances that the lawyers noted the absence of the document. The next day, at the continuation of the hearing, President Le Bras stated “that the lawyers for Mr. Suard can be reassured—the report has been found. It was in the desk drawer of the investigating judge.” Negligence or a desire to conceal a piece of evidence that would clear the accused? I don’t know but am inclined to believe the second hypothesis is the correct one.
The security installations were also questionable from the tribunal’s point of view. At the very least they betrayed the profound convictions of the tribunal. The tribunal simply did not believe that the special protection requested by the Minister of Interior was necessary, including protections at one’s residence. During a hearing where, at the request of the President, I reminded the court of the assassinations, after those committed in France by Action Directe, of senior executives in Germany, where Alcatel Alsthom had important subsidiaries, he asked me if I took with me on my trips to Stuttgart the security equipment at my residence. That was supposed to be funny! I didn’t respond. I should have told him, which was a fact, that it wasn’t necessary because as soon as my plane arrived I was escorted by a car with police officers in uniform.
In 1999, at the Cour d’appel, which at the time was presided over by a grouchy and authoritarian judge whose severity was well known, the hearings were conducted effectively. The Public Prosecutor introduced some more limited requests for indictment and concluded by demanding a reduction in the penalties. My lawyer Jean-Denis Bredin, his soft voice, emotional and showing a refined elegance, stressed the inconsistency of the elements on which the accusation was founded and concluded that his client had been subjected to a Stalinist trial based on fabricated proof. The court finally acquitted me of all the accusations concerning the particular works. As for the cost of the security equipment, the court admitted its necessity after I furnished it with attestations from Michel Rocard, former Prime Minister, and Jean-Pierre Chevènement, former Minister of the Defense, regarding the seriousness of the threats. The court also recognized that it was legitimate that the company paid for that equipment, even at the home of its CEO. But the court found fault in the way in which the head of security at the company, after advice from the accountants, had the costs entered into the books of the company in order to preserve, as much as possible, the confidentiality of the information that would permit one to know the nature of the equipment and the manner in which it functioned. On that basis I was therefore found guilty of the misuse of corporate funds.
For this I had to make a payment to Alcatel Alsthom even though it asked for nothing, since on my departure from the company I had returned the equipment except for the part that could not be removed from the apartment without causing extensive damage to the building. For the latter I had to reimburse the company for its costs. As will be seen in Chapter 3, this amount was in addition to damages that I would have to pay as a result of an action “ut singuli”5 brought subsequently by a small shareholder.
Thus the judicial aspects of the affair over the security work came to an end. But I still had to justify my actions before the Council of the Order of the Legion of Honor. According to its rules, the Order had to decide, since there had been a penal condemnation, if the Order itself would impose a sanction. If so, the sanction would be reprimand, temporary suspension or removal. So I again had to explain myself. In accordance with the Order’s procedures, I explained in a writing, which I prepared with the aid of my lawyers, what expenses were incurred for the security equipment and why they were justified. The Council of the Order, which was more objective than the Cour d’appel and a fortiori than the Tribunal d’Evry, decided “that the facts on which the actions against Mr. Suard were based, considering the circumstances, were not acts contrary to honor and integrity.” As a result, it did not impose any sanction.
I also had to appear before the Appellate Administrative Commission for Customs and Exchange Controls. The fiscal authorities in effect did not miss taking its turn to intervene in this generally confused mess. The National Office for the Verification of Tax Situations (DNVSF) undertook an in-depth verification of my personal situation, a formidable exercise that I would not wish on my worst enemy. The tax inspector determined that the installation of security equipment constituted hidden revenue. It would not have occurred to me to report this on my tax return. He therefore notified me that I was liable for back taxes, which would be increased due to my bad faith and for interest. So it was the third time that I had to pay for this cursed security equipment, which poisoned the daily lives of me and my family because we had constantly to follow precise procedures to avoid setting off a series of alarms. The three payments were: To Alcatel when I was relieved of my job responsibilities; a second time to Alcatel due to a decision resulting from the “ut singuli” action; and now to the State as a result of the actions of the tax authorities! I protested, appealed and finally obtained a decision submitting the back tax claim to the Dispute Settlement Committee.
The Dispute Settlement Committee is a high level institution composed of nine magistrates, three from the Cour de Cassation, three from the Cour des Comptes and three from the Conseil d’Etat. To this Committee the government and plaintiff submit written memoranda, but there is also an oral debate. I therefore had to explain myself before this college of high level judicial and administrative magistrates. I must say that I was very gently contradicted by the senior official of the State Tax Collection Office who had some difficulty, in spite of the protection afforded by his technical vocabulary, explaining how surveillance cameras, installed in the circumstances which I have described above, are seen in the eyes of the tax authorities as revenue received in bad faith.
Finally, several weeks later, the Dispute Settlement Committee rendered its opinion. It recommended that the claim for back taxes be abandoned, as well as the penalties and additional amounts. The Head of the State Tax Collection Office followed this advice except for the interest. I therefore discovered a preposterous situation—the government can require a taxpayer to pay substantial interest on a zero amount, the claim for back taxes having been abandoned. This was the ultimate and comical consequence of the decision of November 28, 1986 of the Minister of Interior on the protection of people threatened by terrorism.
Finally, the ultimate and decisive step in this obstacle course—on November 4, 2009, as a result of a petition that I filed, the Cour d’Appel de Versailles “ordered the exoneration and discharge of Pierre Suard.”
1 Because of the murders of certain business executives (in France, George Besse, the CEO of French car manufacturer Renault, in front of his residence; and in Europe by militant groups, such as Action Directe) the French Minister of the Interior and the head of French security informed the heads of some of the large industrial companies in France which were particularly threatened, including Alcatel Alsthom, that the Government was not in a position to take all the steps necessary to ensure their security, and requested that the companies take extra security measures for their CEOs. Following this request, Alcatel Alsthom installed security devices in Mr. Suard’s primary and secondary residences and took other appropriate security measures. (Translator’s Note)
2 “My silence was not a cavalier way to treat a man who has gone through an especially delicate period of his life, but rather an attitude of respect.
“You have lived through those events as a form of persistent harassment by the media. I can say that as far as I am concerned it was never the case.
“ We have seen each other three times. Twice at your initiative and I retain from them very clear memories and in a certain way rather illuminating.
“I know you are a reserved person. I would happily meet with you, not to evoke the troubles of which you have been the object, but to talk about current events. I would be very happy if you would accept this principle.”
3 This “affair in the affair” is described in detail in Chapter III. Among other things, it is indicated in that Chapter how a security consultant to Alcatel Alsthom placed Denis Gazeau under surveillance. (Translator’s Note)
4 “Alcatel Alsthom—Shot Down in Mid-Flight,” published in 2002 by Edition France-Empire. (Translator’s Note)
5 The nature of an “ut singuli” action is described in detail in Chapter IV. (Translator’s Note)