THE FRENCH government has dismissed as “grotesque” reports that the Luxembourg police have implicated President Nicolas Sarkozy in the creation of an offshore company used to funnel illegal kickbacks from the sale of submarines to Pakistan in the 1990s.
The reports, which first appeared on the Mediapart website, suggest the Luxembourg-registered Heine company channelled money earmarked for secretive commissions to Pakistani middlemen into the unsuccessful 1995 presidential election campaign of Édouard Balladur.
Large commission payments to agents were common in big defence contracts until 2000 and were tax-deductible. But kickbacks – known in France as “retro-commissions” – were illegal.
Mr Sarkozy, who as budget minister was in charge of the submarine sales, was director of the Balladur campaign, which was defeated by Jacques Chirac.
“The president of the Republic has expressed himself in the past and said these are just fairy tales,” said government spokesman Luc Chatel in a televised interview. “The president has nothing to do with this affair.”
Opposition socialists however seized on the Mediapart report, deputy leader Harlem Désir saying Mr Sarkozy and Mr Balladur owed the French people an explanation.
Military secrecy should be lifted to prevent the case from staining France’s reputation, Mr Désir added. “We must know the whole truth.”
Investigating judges have linked Mr Chirac’s cancellation of commission payments to a 2002 Karachi bombing which killed 11 French military engineers who were working on the submarines.
This attack was originally blamed on al-Qaeda, but an internal investigation by the French state-owned shipbuilder DCN attributed it to the non-payment of commissions.
The families of the bombing victims have long campaigned for the full disclosure of all facts pertaining to the case.
Reports now suggest that Luxembourg police, working for French investigators, believe some of the commission money was repaid into the Heine company, a vehicle whose establishment was directed by Mr Sarkozy.
“Eventually, part of the funds that passed through Luxembourg came back to France to finance French political campaigns,” the police dossier is reported to say.
However, the dossier offers no evidence to substantiate the claim.
Mr Sarkozy has long denied any involvement in the case. Last year he dismissed as fantasy claims that money intended for commissions during the sale of the submarines had been used to finance the Balladur campaign.
Mr Balladur has also denied the allegations of illegal funding.