Antoine Peillon's new book connects the dots between Nicolas Sarkozy and rampant tax evasion in France.

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Après Sarkozy, le chaos!" Down to the last straw, as polls show him in dead heat with his rival, Francois Hollande, Nicolas Sarkozy issued a threatening prediction of the economic anarchy sure to rain down on France, and then Europe, if Hollande is elected President in the next few weeks. And indeed, the last time French socialists won, in 1981, stock markets plunged, auguring poorly for Mitterand's economic program, which caused inflation and currency appreciation. But according to Ségolene Royal, who ran against Sarkozy five years ago and was once married to Hollande, the real reason Sarkozy so badly wants to remain in the Elysée is because the French presidential office comes with the perk of prosecutorial immunity.

It's hard to remember that a man so roundly hated today aroused something of a wild hope during his first campaign, with his talk of "réforme" and "rupture" and his great promise to reverse the sense of decline that pervaded France. But Sarkozy has not been all good. Though the country isn't yet in flames, Sarkozy never quite managed to pull France out of the crisis. On his watch, France lost its AAA credit rating, the deficit grew by 632 billion euros (it is now Europe's largest, in nominal terms), exports stagnated, and unemployment remained unchanged.

To make things much worse - and boosting the odds that Royal is correct that Sarkozy's motive is presidential immunity rather than a chance to fix things up - a new book out just in time for the election, Ces 600 Milliards Qui Manquent à la France, by Antoine Peillon, accuses Sarkozy of helping France's very wealthy dodge taxes and find more welcoming homes for their vast fortunes in offshore accounts. Putting aside the question of whether France's onerous tax rates are justified, the fiscal and moral costs of tax evasion are sky high. By Peillon's account, 590 billion Euros worth of French assets are currently parked in offshore accounts, a sum equivalent to a third of France's national debt.

Peillon, a reporter who occupies a respectable perch within French investigative journalism and writes for the Catholic daily La Croix, has taken a deep dive into the system of widespread tax evasion currently in place in France. His account is breathtaking as much for the audacity of the scandal as for the characters it implicates. Banks are only one half of the picture. UBS is not Peillon's only target, but the Swiss bank certainly seems to be "the Rolls Royce" of the game. The other half, sure to make bigger waves given the book's timing, consists of the political players, federal agencies, legal institutions and lawmakers involved in the scheme.

The Scheme

In 2002, three years after UBS first set up shop in l'Hexagone, a French anti-money laundering agency called Tracfin caught wind of the bank's "politically sensitive" accounts - those that belonged to clients suspected of illegal arms sales, terrorism or even nuclear arms trafficking - and began to worry about the national security risks of letting international terrorists use French bank accounts to launder funds of unsavory provenance. Ordered to clean itself up, UBS France fired the careless executives who signed up clients such as a North Korean insurance company with ties to Kim Jong-il, the PLO's investment fund, and the state energy company of Cameroon.

The internal auditor of UBS France at the time, a source Peillon refers to as Nicolas F., intended to audit all four corners of the bank. In the process, he stumbled across the books of the bank's sports and entertainment division, where he discovered expenses that seemed too huge to be real, especially given that the UBS France itself had yet to turn a profit.

To explain this anomaly, Peillon takes us back to the highflying late 1990s, when UBS's mother bank in Switzerland clandestinely dispatched a hundred Swiss bankers throughout France (it is illegal for Swiss bankers to offer services in France) to market their goods to the country's "grandes fortunes." A field book detailed best practices for crossing the border surreptitiously (by boat, or by foot across the mountains) and for avoiding detection in France. Once across the border, executives kept tabs on customer accounts in so-called "milk notebooks," where they recorded transfers between clients' legal French accounts and their undeclared accounts in Switzerland. When the notebooks made it back to Geneva, the information was transferred to a database nicknamed "the Cow," an allusion to the French cash cow.

In France, UBS France, set up in 1999, spared no costs to court wealthy clients by inviting them to sporting events and lavish parties. The goal, claims Peillon, was to take on wealthy French clients and offer them customized tax evasion plans, complete with couriers, legal counsel and personalized shell companies in tax havens such as Bermuda or the Virgin Islands. UBS France's profits showed up on the books in Switzerland, where the illegal accounts were kept, and the French operation went on publicly losing money, year by year.

As Nicolas F. uncovered increasing amounts of evidence that his employer existed solely to help French clients evade taxes, the audit team's data began to disappear in a series of freakish accidents. Soon, the audit team was receiving full-blown threats from Swiss headquarters to avoid auditing certain units or practices.

In 2009, Nicolas F. went to the DCRI, a French federal intelligence agency with a department tasked with monitoring economic and financial affairs. Other whistleblowers within UBS began to report wrongdoing as well. From 2009 until 2011, several UBS executives went to the ACP, a French regulatory agency; others went straight to the Justice Ministry. Tracfin, which investigated UBS France back in 2002, sent a case of its own to the Finance Ministry. The Minister in charge at the time was Nicolas Sarkozy.


Though Sarkozy is mentioned explicitly only in the book's last few chapters, it is hard to avoid the feeling that Peillon's work is entirely about the President. The author makes no secret of his agenda when he writes that his sources came out of the dark because "they felt that this election was the last chance they had to live in a Republic worthy of the name." This is as good an indication as any of the electoral outcome Peillon hopes to see. But investigative journalism is inherently activist journalism, and Peillon's account sticks to facts and testimonies.

Nothing spells out the collision of politics and offshore banking quite like campaign finance. For Peillon, the widely reported Bettencourt Affair is the most telling illustration of Sarkozy's involvement in UBS's tax evasion and the political blessings UBS received in exchange for bleeding France of its full fiscal revenue.

In 2004, Sarkozy voluntarily stepped down as Chirac's Finance Minister to take full-time charge of the Union Pour un Mouvement Populaire (the UMP), the party he would carry to victory in the 2007 presidential election.

Between 2005 and 2008, Peillon claims - and this claim is substantiated by news reports and judicial testimonies - that Liliane Bettencourt, the octogenarian heiress to the L'Oreal fortune and the undisputed wealthiest woman in France, transferred money among her accounts at four European banks - UBS, BNP, Dexia and Generali - to donate twenty million euros to the UMP (the legal maximum is 7,500 euros). The cash ended up stuffed in envelopes, in increments of 150,000 to 200,000 euros, and delivered to party bosses. By bankrolling Sarkozy's 2007 presidential victory, Bettencourt purchased political immunity for her herself (Peillon calculates that her debt to France in unpaid taxes stands at 108 million euros) as well as for the banks holding together what Peillon calls an "occult system of campaign finance."

At the time of the election, Eric Woerth the treasurer of the UMP, was also the treasurer for Sarkozy's presidential campaign. In the year preceding the election and for two years afterward, Woerth's wife, Florence, helped manage Bettencourt's investment fund. Bettencourt was not the only UBS client to open her pocketbook to Sarkozy. Until the election, Woerth allegedly traveled frequently to Geneva to collect millions in undeclared campaign contributions from wealthy French exiles living in Switzerland.

When Sarkozy became President in May 2007, he named Woerth budget minister, making him France's de-facto tax collector. Less than a year later, Woerth claimed that France had collected too much from the country's top earners and gave Bettencourt a thirty-million-euro tax rebate.

Peillon is not the first to report on the Bettencourt Affair, but he is the first to connect the dots so clearly between the illegal financing of Sarkozy's first presidential campaign and UBS's massive tax dodging operation. Given Peillon's evidence, it's easier to understand why the wheels of French justice grind so slowly, and why Paris courts didn't file a case against UBS until a month after the book's publication, in March 2012. Peillon's play-by-play account of fraud in motion also elevates Sarkozy's early promises to curb tax evasion from the realm of hypocrisy to a higher form of betrayal. In 2009, in London for the G20 summit, Sarkozy declared war on tax havens and said that they were "done for." And when Sarkozy first assumed office, Woerth gave television interviews in which he roundly condemned HSBC for its purported tax fraud (the bank was never prosecuted).

The Election

France's tradition of political scandals is different from the American model, where sex and lies tend to dominate; Strauss-Kahn aside, venal corruption has usually played second fiddle in France to the more complex and wider-spanning moneyed scandals of the country's leadership and elite. Yet even by French standards, Sarkozy has accumulated an unusually exhaustive resumé - Karachi, Bettencourt, Bourgi, Qaddafi, Wildenstein, Tapie, Bourgi, Joyandet... Ensnared in scandals local and international, personal and political, stemming from arms sales, dead spies, kickbacks, favorable treatment, fraud, insider information and countless other incarnations of corruption, Sarkozy has come to be more detested than any French President in memory.

Even though he might conceivably win the election, the revulsion Sarkozy inspires is personal, rooted in his character and extending beyond any particular policy or single thing that he has done. When Sarkozy ran in 2007, he stood for hard work and decency. He stated that he would "put the moral heart of capitalism back into place" because he didn't believe in "the survival of capitalism without ethics." Yet few things oppose themselves more strongly to a "moral capitalism" than state-sanctioned tax evasion for the wealthy.

Peillon's book is partly a paean to the decency of his sources, a list comprised of banking executives, regulators, intelligence officials and lawmen. And his zealous book comes at a crucial moment. Before the book appeared, Eric Woerth resigned and his wife Florence quit her job working for Bettencourt. Old Sarkozy associates, Nicolas Bazire and Ziad Takieddine, are currently on trial for their role in another financing scandal, called Karachigate because it involved kickbacks from arms sales to Pakistan. And now, perhaps prompted by Peillon's big splash, the noose is closing around UBS. The charges against UBS wield a maximum fine of 750,000 euros and a five-year prison sentence (for whom is unclear): a dent in UBS's armor, but a dent nevertheless.

Sarkozy does seem to be the last man standing. Whether he wins, and whether he is charged with wrongdoing (as was his predecessor, Jacque Chirac, when he stepped down after 12 years in office), Peillon's book has solidified the case that Sarkozy knew about and encouraged the wide-ranging tax evasion of the French elite. At a time when austerity is the watchword across the European continent and nations like Spain and Italy are being chastised for their spendthrift finances, it seems unconscionable to let France's fiscal leakage carry on.