Police Detain France Telecom Chief

PARIS--France Telecom SA (FTE.FR) Chief Executive Stephane Richard was detained by police Monday morning for questioning as part of an investigation into the possible misuse of public funds while he was an official at the French Finance Ministry.

A spokeswoman for the Paris prosecutor's office said Mr. Richard could be held for up to 48 hours while he is being questioned, as investigators decide whether to put him under formal investigation or release him.

A spokesman for France Telecom said Mr. Richard's detention "is a normal measure in this type of investigation." He said Mr. Richard's duties would be handled by France Telecom's deputy chief executive and chief financial officer while he is being questioned.

The detention of Mr. Richard is the latest twist in what is often called "l'Affaire Tapie," a two-decade tale pitting French tycoon Bernard Tapie against the French state. French investigating magistrates are investigating whether officials at the French Finance Ministry committed a criminal offense when they decided in 2007 to refer a dispute with Mr. Tapie to an arbitration panel that ended up granting the French businessman 420 million euros ($555.2 million).

Socialist lawmakers, who were in opposition at the time, alleged that the decision smoothed the way for Mr. Tapie to reap bigger damages from the French Treasury than he would otherwise have got in the courts as a form of thanks for his support for Nicolas Sarkozy, a conservative, in his successful 2007 presidential election.

At the time, Mr. Richard was chief of staff of then finance minister Christine Lagarde. Ms. Lagarde, who is now head of the International Monetary Fund, was questioned for two days last month by magistrates about her decision to refer the case to arbitration. She was named a material witness in the case and wasn't charged.

Investigators are probing what role Mr. Richard had, if any, in setting up the arbitration panel, according to a person close to the inquiry. They have already informally questioned Mr. Richard, and police searched his home in January.

Investigators have also questioned others who are potentially involved in the case, including the head of the government entity that ended up paying Mr. Tapie, as well as one of the arbitrators on the panel, who is alleged to have had connections to Mr. Tapie. Last month, investigators placed the arbitrator--Pierre Estoup--under formal investigation for conspiracy to commit fraud, but have yet to open formal probes into any other members of the alleged conspiracy.

Write to Sam Schechner at [e-mail]

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