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FRANCE: Sarkozy calls on head of Sociéte Générale to resign over trading scandal

by Katrin BennholdInternational Herald Tribune
February 26th, 2008

President Nicolas Sarkozy of France called on the head of Sociéte Générale to resign over a €4.9 billion trading fraud, reviving a standoff between the Élysée Palace and the large French bank.

"I don't understand the Sociéte Générale affair," Sarkozy said in an interview published Tuesday in the newspaper Le Parisien. "When the president of a company experiences a disaster of this magnitude and he doesn't face any consequences, it's not normal."

The remarks, which drew immediate criticism from the largest French business lobby, were the president's bluntest and most personal attack yet on Daniel Bouton, the chairman and chief executive of the embattled bank.

They also came a day after Bouton, who had his offer to resign twice rejected by the bank board, told the financial newspaper Les Echoes that the offer was now off the table.

"That someone earns €7 million doesn't shock me. On one condition: that he takes responsibility," Sarkozy said, ending a month of guarded silence on the issue. "That's the problem with Daniel Bouton: I don't have anything against him. But you can't say, 'I'm going to be paid €7 million per year,' and when there is a problem, say, 'It's not me.' That, I don't accept."

The president's comments echo those heard elsewhere in France and abroad, where observers expressed consternation at the fact that Bouton had been allowed to stay in place after presiding over the biggest trading fraud in history, worth $7.26 billion.

Sarkozy's message appeared to be deliberately timed. It came in response to an unrelated question about profitable companies planning layoffs, like the steel maker Arcelor Mittal.

On Jan. 28, four days after Sociéte Générale had first announced the fraud, Sarkozy had already said publicly that bank managers should face "consequences," but he had refrained from naming Bouton. At the time, several of his advisers also warned that the government was ready to step in if foreign banks made hostile takeover bids.

France has a long record of protecting its national champions from takeovers and bankruptcy.

From the bailout of another bank, Crédit Lyonnais, at a cost of $20 billion, to the French taxpayer in the 1990s, to a series of defensive industrial mergers to stave off foreign bids in recent years, "economic patriotism," as it is known in France, has been a fixture of the political landscape.

Still, the largest French employers' federation, Medef, reacted swiftly and negatively to Sarkozy's latest comments. Laurence Parisot, the president of Medef, insisted Tuesday that it was up to the board of Sociéte Générale to make a decision on its management.

"In an extremely serious crisis like the one at Sociéte Générale, only board members have all the information needed to judge the situation and take the right decisions," she said on the Europe 1 radio station.

"Is the general of an army responsible for an extortion carried out by a soldier whose name he does not even know?" Parisot asked. "The general is above all the one responsible for taking the best decision when faced with a major accident. Only the members of the SocGen board are in a position to say if they have the best general or not - it is certainly not up to politicians to say."

To many at Sociéte Générale, Bouton has become a symbol of the bank's independence from political meddling. When its larger rival, BNP Paribas, sought to swallow it up in 1999, Bouton resisted, even as politicians lobbied for the creation of a combined French banking champion.



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