Ernest-Antoine Seillière, former chairman of the supervisory board of the Wendel group, at the Paris courthouse, January 17, 2022 (AFP/Archives/Bertrand GUAY)
Did they knowingly participate in an ultra-sophisticated financial arrangement aimed at deceiving the tax authorities on colossal sums? The Paris court renders its judgment on Wednesday concerning the former leaders of Wendel, including the former president of Medef, Ernest-Antoine Seillière.
Fifteen years after the events, justice is ruling on a profit-sharing program called Solfur, which in 2007 allowed fourteen managers and executives to achieve a total net gain of 315 million euros, without being taxed.
The National Financial Prosecutor’s Office (PNF) has requested four years in prison, including two years in prison, against Baron Seillière, 84, heir to the Wendel dynasty and at the time chairman of the supervisory board.
Saying he was “outraged” to be facing a court, the man who was head of the Medef from 1997 to 2005 vigorously defended himself, like all the defendants, of having wanted to fraudulently evade around 30% tax on his share of Solfur – 79 million euros.
The prosecution demanded five years in prison, including three firm – a non-adjustable sentence – for the former chairman of the management board, Jean-Bernard Lafonta, 60, who has since co-founded the HLD fund.
Penalties of up to two years were required against eleven senior executives and a former tax lawyer prosecuted for complicity, with, for all, a fine of 37,500 euros and professional bans.
The trial in January-February, with technical or even byzantine debates, plunged the court back into another era, before the financial crisis of 2008.
– “Artificial editing” –
In the early 2000s, Wendel, a steel company founded in 1704 in Lorraine that had become an investment company, experienced a change in strategy with the arrival of a young boss, Jean-Bernard Lafonta, who multiplied debt buyouts.
Executives, financial director, investment manager or communication director invested in Solfur in 2004 and, in parallel with a reorganization of the group three years later, became owners of 4.6% of Wendel, whose share price rose soaring – they make a gain of almost 200%.
Through a succession of skilful operations, most then benefit from a “suspension of taxation”, a device created to promote economic activity, making it possible to defer taxation on these capital gains.
Having become disastrous for many executives, especially after the subprime crisis, Solfur quickly aroused the rebellion of an administrator, cousin of Ernest-Antoine Seillière, and legal proceedings in shambles.
Then, in December 2010, executives were notified of a heavy recovery of 240 million. For the tax authorities, who will take legal action in 2012, this is an “abuse of rights”: the diversion of a legal device.
It is “one of the most important tax frauds (ever) prosecuted in a criminal court”, according to the PNF, who described an “artificial assembly”, “complexified” on purpose, with an “exclusively tax purpose”.
By other mechanisms, mentioned in exchanges of emails, this tax deferral could also have become permanent, argued the PNF.
One of the issues in the case is to determine the intention, or not, of the defendants to defraud: highly qualified, they are not “Madame et Messieurs Jourdain” who would commit tax evasion “without realizing it” , ironically brushed off the accusation.
– In good faith –
On the contrary, the defendants claimed to have believed, in good faith, to be able to benefit from this tax regime in view of the case law of the time, supported by the expertise of the renowned law firm Debevoise & Plimpton.
Main beneficiary of Solfur with 116 million euros, Jean-Bernard Lafonta is also tried for complicity in the fraud of his co-defendants, because he is suspected of having “supervised” the assembly and “forced the hand” of certain executives.
“Absurd”, assured the bar the one who resigned from Wendel in 2009 in the wake of this affair and the disputed rise in the capital of Saint-Gobain.
After years of litigation, almost all of the defendants concluded a transaction with the tax authorities, some of them being reimbursed millions of euros paid on the basis of the first adjustment.
The bank JP Morgan, which had granted massive loans to managers as part of Solfur, was also dismissed for complicity in tax evasion. She agreed in September to pay a 25 million euro fine via a court settlement to close the proceedings.
© 2022 AFP
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