Credit Lyonnais bought a studio but loses script

Anne-Elisabeth Moutet looks at the hubris of a French bank that overreached itself

The European, 28 March 1996

THE persistent rumour in Paris is that Jean Peyrelevade, the chairman of Credit Lyonnais, is seriously thinking of jumping ship and joining Lazard Freres as a senior partner. It surprises no one.

Until a year ago, his bank was commonly known as "Discredit Lyonnais" , and it sometimes seemed as though there was no loss-making venture in Europe in which Credit Lyonnais was not involved. However, Peyrelevade was recently able to announce that the bank was in the black for the first time since 1991; although he was not expecting wild praise, he did hope for some modest kudos.

The bank posted token 1995 profits of Ffr13 million ($2.5m) for an overall gross banking income of Ffr43 billion - the latter down by five per cent from last year. Provisions still stood at almost Ffr6bn, encouragingly down from Ffr14bn last year. Overheads were down by 3.4 per cent.

But few French analysts or fellow-bankers were in anything but a scathing mood, pointing out that even after the biggest bail-out in French banking history, estimated at Ffr45bn by the European Commission when it gave it a reluctant go-ahead, 1996 projections were so sombre that it was unlikely that Credit Lyonnais would stay in the black.

Peyrelevade forecast that the fall in French interest rates would cost Credit Lyonnais an additional Ffr1bn to finance its loan to CDR (Consortium de Realisation), the state-backed body established last year to administer much of its debt.

Privately, most Parisian experts believe the cost of this loan will be closer to Ffr2bn. CDR borrowed Ffr145bn from Credit Lyonnais at a variable rate, while Credit Lyonnais refinanced it at a fixed rate on the markets.

THE Credit Lyonnais saga has occupied, and fascinated, the French political and banking scene for almost five years, although measures to contain what may eventually amount to a Ffr100bn catastrophe started only on 10 November 1993, when Jean-Yves Haberer, the bank's chairman since 1988 and the main architect of its all-out expansion, was finally sacked by Edouard Balladur's government. In the meantime, the bank had posted Ffr1.8bn losses in 1992, and was about to announce Ffr6.9bn losses for 1993.

That Haberer stayed so long in office has everything to do with the French system of governance of stateowned enterprises. Credit Lyonnais' boss, like his France Telecom or Thomson counterparts, is appointed by the Cabinet, and usually plucked from the small, incestuous ranks of the upper French civil service, bred in elite schools, mostly ENA (Ecole Nationale d'Administration, Haberer's alma mater); and sometimes Ecole Polytechnique. As the losses mounted and the scandals surfaced -- bankrupt Credit Lyonnais creditors from Robert Maxwell to Giancarlo Parretti made world headlines -- it was distasteful for ministers who had themselves graduated from the same exclusive establishments to throw a colleague to the dogs.

Haberer belonged to ENA's creme de la creme, the Inspection des Finances, a state body that creams off only the five best out of each 120-strong ENA class annually. He had then headed the French Treasury during the presidency of another Inspecteur des Finances, Valery Giscard d'Estaing, before branching out into the private sector and chairing Paribas. Cross the Inspection des Finances with the senior ranks of the Treasury's alumni, and you find a list of a couple hundred men -- and few women -- who are the most powerful figures of France.

Haberer's fantastic ambitions for Credit Lyonnais become clear from a list of its major fiascos. In 1990 it financed, to the tune of $1.3bn, Giancarlo Parretti's takeover of MGM studios, through its Dutch subsidiary Credit Lyonnais Bank Nederland. During the 1994 National Assembly parliamentary inquiry hearings into Credit Lyonnais, it emerged the decision to go ahead with the MGM deal was taken in half an hour by the Credit Lyonnais executive in charge of foreign subsidiaries, Georges Vigon.

Vigon, who had not even consulted his direct boss, Alexis Wolkenstein, had previously been forbidden by Haberer in writing to grant any new loans to Parretti. But this did not prevent him from stepping in after Time-Warner withdrew from a similar deal a few hours before the projected closing. Episodes like this were common under Haberer.

Such was the bank's gung-ho culture at the time that Vigon was congratulated rather than sacked. Parretti has since been declared bankrupt by American courts, while his Credit Lyonnais-financed partner, Fiorino. Fiorini's Swiss company SASEA, now insolvent, is the object of a Swiss judicial inquiry. Credit Lyonnais still owns the loss-making MGM, which it has unsuccessfully tried to sell off ever since.

In 1990 Credit Lyonnais also bought, for Ffr250m, a controlling interest in the indebted International Bankers bank from its owner, Jean-Maxime Leveque, another Inspecteur des Finances and Haberer's predecessor as Credit Lyonnais chairman. A flamboyant right-wing establishment figure, Leveque, having chaired French bank CCF before its 1982 nationalisation, fancied himself a banker; and it would have been bad form for a fellow inspecteur to deny him. Not only did International Bankers specialise in risky property financing it turned out that several of its top executives had been receiving illegal commissions to extend loans. International Bankers is now in receivership, with few of its Ffr8bn debts expected to be recovered.

Since 1977 the maverick businessman, politician, film actor, and football impresario Bernard Tapie had enjoyed a special relationship with SdBO (Societe de Banque Occidentale), a wholly owned Credit Lyonnais subsidiary specialising in financing buyouts of bankrupt companies.

BASICALLY an asset-stripper, Tapie outreached himself with the buyout of Adidas in 1990, which Credit Lyonnais forced him to sell two years later to a consortium headed by former Saatchi & Saatchi chief Robert Louis-Dreyfus for Ffr1.6bn, as his outstanding debt to SdBO stood close to Ffr2bn.

Since Peyrelevade's arrival, the Tapie affair has degenerated into a blood feud. Peyrelevade, a born Marseillais of modest origins, resents Tapie's political ambitions in Marseille as well as his flamboyant, Credit Lyonnais financed lifestyle. He ordered that Tapie's 18th- century town-house and antique furniture be publicly repossessed in the summer of 1994.

Tapie is suing Credit Lyonnais. He claims that he was forced to sell at a loss; Adidas was successfully floated on the Frankfurt stock exchange last year, and stands at a Ffr11bn market capitalisation.

Credit Lyonnais' nose for a bad loan was unrivalled; its poor customers include Eurotunnel and the developers of Canary Wharf, Novalliance venture capital and the Jacques Fath couture house. If Credit Lyonnais was not top of the list of French banks hit by the property crisis, it is partly because losses sustained by other banks were even better publicised. In fact, the Lyonnais shared the property disaster, mostly with the developer Michel Pelege.

Pelege, like La Défense developer Christian Pellerin, is still afloat -- entirely propped by Credit Lyonnais, which feels it would stand to lose more in bankruptcy proceedings. SdBO is stuck with an unsaleable property portfolio -- the "assets" unsuccessfully stripped by its stable of dubious 1980s turnaround specialists, such as the disreputable Pascal Jeandet, who was bankrupt when he died two years ago, costing SdBO Ffr1bn.

The European Commission gave its agreement to the government bail out on condition that Credit Lyonnais sold 35 per cent of its foreign banking network. This leaves Credit Lyonnais with a reduced income basis at a time when even sound banks find it hard to make money in commercial activities. Haberer's ambitions of creating a German-style universal bank are dead: Credit Lyonnais has also been forced to shed most of its industrial portfolio.

Reduced to the state of a chronically unprofitable rump, Credit Lyonnais is short of expectations, and bereft of hope. It is hard to fault Peyrelevade for thinking of jumping ship.

© The European & Anne-Elisabeth Moutet, 1996

The Happiest Yuppie In Paris

Moutet's Paris: The Happiest Yuppie In Paris

The European, 28 November 1994

THE successive corruption scandals involving France's largest water and building utility, the 150 billion-franc Compagnie Générale des Eaux, have made at least one happy yuppie. This is Jean-Marie Messier, 37 and 3/4 [he'll be 38 on 13 December], youngest partner at the prestigious investment bank Lazard since 1989 and former adviser to Finance Minister Edouard Balladur in 1986-1988. Messieur has been installed last week as designated successor of the redoubtable, secretive Guy Dejouany, 73, at what may be France's highest salary, 16 million francs a year.

For 18 years Dejouany ruled as an absolute monarch over his 200,000 employee-strong empire (where he started working in 1961) from his discreet rue d'Anjou headquarters, a chequebook's throw away from the Elysee. Nobody knew his diary, not even his secretary. His personal telephone lines were scrambled by state-of-the-art military devices. Strong men were daily seen leaving his office in a sweat: Dejouany, who never held a meeting of more than three people outside his company board, played at naming favourites, hinting that he would leave them in charge when he retired, then at pitting them against one another. Under his stewardship CGE became the world leader in water treatment, but also diversified into cable and pay TV (he's the one who really got Mitterrand's old friend André Rousselet fired from Canal Plus.)

But now, as revelation after revelation of payoffs to politicians in exchange for local contracts have made Dejouany the target of several judicial inquiries, the old man had to step down. When he announced his choice of successor, the CGE board (not to mention the infighting top executives) were enraged. Messier? This chubby baby Enarque with absolutely no industrial experience and only five years in investment banking under his belt? Peugeot's Jacques Calvet, a board member, loudly threatened to resign, before bowing to the decision. Young Messier, now effectively in charge of running the company, should be formally made its president in June 1996, after the board approves the 1995 results. "We needed someone clean, not someone from inside the company, who might one day be charged with yet another corruption scandal," CGE insiders told the press.

This drew guffaws from the Paris political and business establishment. Young Messier, who has more than once been dubbed the most ambitious Frenchman of the Nineties, used to be in charge of the first big round of privatisations at the Balladur Finance ministry. The bank advising most of these privatisations was Lazard. Barely a few months after the reelection of Francois Mitterrand to the presidency, ending the first two-year cohabitation, Messier was hired by, surprise, surprise, Lazard, with unheard-of privileges, directly as a full partner (associé-gerant) aged 33, with an office significantly located next to the bank's chairman, the billionnaire Michel David-Weill.

His first job was of course to follow the smooth workings of the newly privatised companies, in direct contradiction with French law, which stipulates that civil servants are not allowed to move into private jobs directly related to their former goverment activities.

Next Messieur was sent to New York for a while, to work with the legendary Felix Rohatyn on the multi-billion franc acquisition by Groupe Schneider of Sqare D, an electrical company, snatching the fat success fees from JP Morgan's, the white-shoe Wall Street bank that had initially presented Square D to Schneider. When he came back to Paris, he was the bank's star, and David-Weilll's obvious favourite.

How does young Jean-Marie do it? "He calculates every single move," says an associate. "For instance, he dresses more modestly than your average investment banker, which usually reassures industrialists. His 17th-arrondissement flat is rented, the furniture is dowdy Napoleon III. His wife Antoinette is no socialite, she prefers to care for their three kids. He listens a lot and unlike most members of the French establishment -- to which he belongs both by background (his family once were partners in the aviation firm Messier-Latecoère) and by right as an Inspecteur des Finances, one of the top 5 of his ENA class -- he never shows off. Balladur likes young men who can keep secrets and he called Messier 'as safe as a tumb'. David-Weill, too, likes people who can keep secrets. Messier knows where most Establishment bodies are buried."

REMEMBER this figure next time French farmers are out in the streets burning prefectures and dumping artichauts: according to the highly reliable INSEE (Institut National des Statistiques et Etudes Economiques), the average French farm income went up 11.5% in 1994, the CAP's second year over 4 times current inflation. Meat farmers made 12% more than last year; winegrowers took in a whopping 40% and large cereal and grain growers (usually accused of reaping all the benefit from demonstrations organised by poorer small farmer) 3% only.

© Anne-Elisabeth Moutet, 1994.

The Saigon Kid

Moutet's Paris: The Saigon Kid

The European, 2 May, 1994

An amusing photograph is making the rounds in Paris these days. It shows a rather surly young man, black hair parted in the middle, dressed in a wrinkled shirt and sawn-off denims uncovering white knees, lounging in the seat of a bicycle rickshaw in the middle of a Saigon boulevard.

This is none other than Romain Balladur, 24, the youngest of our PMs four sons. This apple of his father's eye has mysteriously managed, after graduating from ISG, a second-string Paris business school, to be posted for his military service as a VSNE (Volontaire pour le Service National en Entreprise), or business trainee, for the water and construction conglomerate Lyonnaise des Eaux-Dumez.

It is perhaps worth mentioning that a recent parliamentary report on campaign finance in the last General Election showed Lyonnaise-Dumez to have been the third largest contributor overall to candidates of whatever political stripe, even though its chairman, Jérôme Monod, is a card-carrying member of the Gaullist RPR.

Balladur the younger alighted in the former French colonial capital last November, I'm told, and set up his quarters at the Rex, one of the city's better hotels. Since then his activities have been mysterious. He has been having a wonderful time, members of the local French expatriate community will tell you, not very helpfully.

In an interesting coincidence, young Romain's tracks in Saigon and Hanoi crossed those of another famous scion of French officialdom, Jean-Christophe Mitterrand, formerly his father's African affairs adviser at the Elysée palace, now a consultant for Lyonnaise-Dumez's arch-rival, the mammoth Compagnie Générale des Eaux (also a generous contributor to many an electoral campaign). Having managed to pull off a contract to build a tubings factory near Hanoi for CGE, Jean-Christophe couldn't help a dig when asked about his young rival: "Don't confuse us, please. I'm involved in serious work!"

IT WILL be even more difficult than usual setting up an appointment with any Parisian of note between 12 and 23 May next: everyone who's anyone has managed to wangle, earn or steal some sort of assignment at the Cannes Film Festival, enabling them to hop South for at least three days of sun, screenings, galas, and gossip at the Hotel Majestic bar (tip: the Carlton is for Hollywood types).

One celeb however will be conspicuously absent from the opening star-studded gala dinner, traditionally given by the French Ministry of Culture: Jack Lang, the long-serving, charismatic and extremely popular former Culture minister under Mitterrand's both terms, has been informed by his lackluster successor Jacques Toubon's secretary that he was not welcome to dinner on the 12. News of this ham-handed slight went round Paris like lightning, with comments overwhelmingly detrimental to the hapless Toubon. Had he wanted to emphasize his (legitimate) fear of being upstaged by his predecessor, the gossip goes, he couldn't have gone about it in better way.

Meanwhile Jack Lang and his wife Monique have booked a suite at the Hotel du Cap-Eden Roc, like Bel-Air royalty, for the duration of the Festival, and will be among the guests of honour at the even more glittering party given on the following day, Friday 13th May, by the unsuperstitious Claude Berri (of Germinal and Jean de Florette fame) for his existentialist, Patrice Chéreau-directed megaproduction of Alexandre Dumas's La Reine Margot, starring Isabelle Adjani. Nobody in Paris doubts that Jack and Monique will be better seated than Toubon and his wife Lise

WOULD YOU willingly spend an evening reading 260 pages of statistics? Well, possibly, if they all have to do with Frenchwomen. Or so bets Agnes Michaux, a sociologist with an appreciable sense of humour, who has just come up with a book gathering every fact, poll, figure, statistic, test, market study, and assorted theses devoted to the female of the French species. The result is of course riveting (albeit better absorbed in small instalments.) Did you know that 7% of Frenchwomen have already made love in a lift? That 22% are bosses of their company? That 87% define the ideal man as "the one who makes me laugh"? (but that 84% also define him as owning a building society savings account large enough to buy them a house.) That 58% of them believe in astrology? (but 68% believe in Paradise.) That 27% would have liked to have been born in the aristocracy? That they account for 35% of the French homeless? That 3% would have liked to be Francois Mitterrand's mistress? That 26% keep their bank account separate from their spouses? That 91% say they're happy? And that 0%, not a single one, would leave their place in a liferaft to Madonna?

METEOROLOGICAL studies have just proven that Paris, the most compact city in Europe (and the one with the largest population density) enjoys a specific microclimate with temperatures 6°C warmer on average compared to its immediate surroundings. This is caused by the heat radiated by the city's buildings and population, but also by Paris's waterproof quality (most of it is covered in asphalt, stone or zinc, so that rainwater flows straight into gutters and sewers instead of slowly evaporating in the air as it does in cities with more public and private parks and gardens.) The heat of the city also repels rain in the cold season: in the past twenty years the average annual raintime was 840 hours at Orly airport, as opposed to 529 hours only in the Parc Montsouris weather observatory.

THE PARISIAN couture world is waiting with bated breath for 18 May, when Paris's Tribunal de Commerce pronounces its ruling on the bitter fight pitting Yves Saint Laurent against the American designer, Ralph Lauren, whom the Frenchman accuses of having plagiarized one of his designs, and is suing for 5 million francs. Sides are being taken, self-appointed goodwill ambassadors spend hours on transatlantic phone calls; even US Ambassador Pamela Harriman has been drawn into the battle between the two rag-trade primadonnas.

Ralph Lauren, who is countersuing YSL supremo Pierre Bergé for defamation for 1 million francs, has already sold 123 of his thousand-dollar black sleeveless tuxedo-cut evening dresses, "the exact copy, minus the qulity," Bergé sneers, of a FF140,000 ($25,000) couture model from YSLs 1970 winter collection. Perhaps significantly, the company withdrew the model from its racks the minute Saint Laurent sued. (In 1992-93 YSL had shown the dress again in its Rive gauche ready-to-wear collection.)

Respectively standing in each corner, watched over like prizefighters by huddles of protective lawyers, two top models wearing the two dresses were in turns sent sashaying in the narrow courtroom to demonstrate the fraud, or absence thereof, last Friday. "The Saint Laurent dress is obviously more beautiful, but that can't influence my ruling," Judge Madeleine Cotello remarked before retiring.

© Anne-Elisabeth Moutet, 1994.

The Renault Blues (and Was De Gaulle A Royalist?)

Moutet's Paris: The Renault Blues (and Was De Gaulle A Royalist?)

The European, 18 March, 1994

Renault's boss Louis Schweitzer, the quiet Protestant Polytechnicien who used to be chief of staff to Socialist PM Laurent Fabius (and is a direct descendent of legendary Dr Albert Schweitzer), has cause to feel sore these days. First of all, his long-planned merger with Volvo, the ailing Swedish carmakers, was botched at the last minute. The jittery, privately-owned Swedes left their French bride standing at the altar after our new Minister for Industry Gérard Longuet's undiplomatic gesticulations, insisting to announce and sign the new contract himself, thereby showing how little the French government believes in the independence of the companies it controls.

This cost Renault, in addition to a massive loss of face, hundreds of millions of francs in fees to their investment bankers, the arch-establishment Lazard Frères. (The Lazard partner who drew up the contract, énarque François Polge de Combret, a former aide to President Valéry Giscard d'Estaing, is also said to have included, with Giscard-like arrogance, clauses leaving the Swedes in casual ignorance as to the French government's golden shares.)

Secondly, Schweitzer, who thought he would preside over the Renault privatisation, now awaits to be sacked on 22 May, the date at which he could reasonably have expected his mandate to be renewed. (The company is comfortably in the black and the entire Renault range of cars is a success, to the extent that the R21 is now the best-selling foreign car in Germany.) Longuet, a naive soul, was all in favour.

Yet instead of Renault, the government will next put the loss-making Bull computers company on the block, even if it means flogging it off at bargain basement prices to IBM: Edouard Balladur has decided that no Socialist could possibly have the power to set up a noyau dur, the tightly-knit group of influential shareholders which prevent large French corporations from being taken over. Instead, Schweitzer is currently being enticed to accept the chairmanship of SNCF, the national railways, which has posted losses of FF 10Bn last year, is overstaffed, strike-ridden, under attack from the Greens for its projected TGV-Provence, and has just failed miserably to introduce its new reservations system, Socrates. Schweitzer's qualifications, you are told in Paris, is that he has always collected model electric trains and of course that he's a Fabiusien.

POOR Jacques Delors is rumoured to be on the verge of a nervous breakdown. At the very time when he is being pressed to run for the presidency by a wide majority of left-wingers, who believe he can attract enough votes from the centre to win in 1995, his strong-willed daughter, former employment minister Martine Aubry, has put her foot down. Aubry has a good shot to become France's first woman president in 2002, and reportedly told her father that his taking the top job would be damaging to her own career (she would hate the likely suspicions of nepotism). The mousy Madame Delors herself, a bespectacled, unfashionable woman who may not relish the perspective of living in the Elysée glass-house, is said to have sided with her daughter, telling the beleaguered Delors that it was ''Martine's turn.''

WAS General de Gaulle a Royalist? So says Henri, Comte de Paris, 85, the pretender to the throne of France, who for years told intimates (and not-so-intimates) how Le General really intended to make him his successor in 1965.

The Comte prefers to underline that he's descended from Louis XIV younger brother, Philippe, Duc d'Orléans, than from France's last reigning King (and first Constitutional monarch), Louis-Philippe, called ''the regicide'' by most of his family since he voted the death of his cousin Louis XVI in 1793.

Barred from living on French soil by an 1886 Bill of Exile repealed only in 1950, Henri de Paris fought in the Foreign Legion during the Second World War, and finally came back to France with his family, soon to be sought out, says he, by General de Gaulle. They started meeting regularly over lunch, a habit which didn't stop with de Gaulle's return to power in 1958. The Comte claims de Gaulle had in mind for him a scheme not unlike Franco's high-handed restoration of Juan-Carlos de Borbon in Spain - but that the General's entourage almost coerced him into standing a second time. Surviving Gaullists guffaw at this. One didn't coerce de Gaulle, they say, adding that the Comte would have believed anything.

Now the Comte has published in book form his entire correspondence with de Gaulle (Dialogue sur la France, éditions Fayard), as well as what he claims to be exact transcripts of their conversations. The result is, how shall one put it, embarrassing.

The conversations show de Gaulle discussing everything from Algerian independence to the Fifth Republic Constitution with the Comte. The letters are considerably sparer, to the extent that the Comte has had to include absolutely every single piece of paper that ever circulated between them: bread-and-butter letters, Christmas cards, condolences, congratulations for the Comte's thirteen children's marriages, cover- and thank-you notes, stiffies from long-forgotten State dinners at the Elysée (robe longue, décorations), transcripts of telephone calls between de Gaulle's and the Comte's private secretaries, opinion pieces the Comte wrote for his own political newsletter and sent to the Elysée, everything is grist to his mill to fill up some 200 widely-spaced pages.

The most interesting revelation is no doubt that the General usually signed off with l'hommage de mon fidèle devouement, while the Comte never failed to conclude as votre affectionné, Henri., which I can't help believing must have sounded to the General as a deplorable instance of familiarity.

HOWEVER ungallant this sounds, it's hard not to notice that as his ratings plunge in the polls, Edouard Balladur seems to have gained the few extra pounds that cause his beautiful, made-to-measure Henry Poole Savile Row suits to strain at the seams. In his five years in Opposition, preparing for his current job with amazing determination (and a full-time staff of half a dozen political advisers), the sweet-toothed Balladur lost over 10 kilos in order to look younger on the day of his projected appointment as PM, a remarkable achievement for a man of 60 whose favourite pudding is a heavenly confection of whipped cream, chocolate and chestnut mousse called a Mont-Blanc from the renowned rue de Rivoli tea-room Angelina's. Vowing he'd never regain his flab, Balladur intrepidly had all his pinstripes, herringbone tweeds, exquisite Prince of Wales checks and heather mixture sports jackets flown to London to be taken in. Considering the price (some 2,000 for a coat, a decent shirt and two pairs of trousers) of a single Henry Poole outfit suitable for the nattiest man in France, the PM now has what might be called a considerable vested interest in staying popular and keeping off the gratification food.

© Anne-Elisabeth Moutet, 1994.