Did they knowingly participate in an ultra-sophisticated financial scheme to deceive the tax authorities with colossal sums? The Paris court on Wednesday will rule on Wendel’s former leaders, including former Medef president Ernest-Antoine Seillière.
Fifteen years after the events, the justice system is ruling on a profit-sharing program called Solfur, which in 2007 allowed fourteen managers and executives to achieve a total net profit of 315 million euros, untaxed.
The National Financial Prosecutor (PNF) has demanded four years in prison, including two years, against 84-year-old Baron Seillière, heir to the Wendel dynasty and chairman of the board of trustees at the time.
The man who headed the Medef from 1997 to 2005, saying he was “outraged” to appear in court, defended himself vigorously, as did all the defendants, for fraudulently taking about 30% tax on his share. in Solfur had wanted to evade – 79 million euros.
The prosecution demanded five years in prison, including three hefty sentences – a non-adjustable sentence – for former chairman of the board, Jean-Bernard Lafonta, 60, who has since co-founded the HLD fund.
Sentences of up to two years were sought against 11 senior executives and a former tax lawyer who were charged with complicity, with all fined €37,500 and disqualified from working.
The January-February trial, with technical or even Byzantine debates, plunged the court back into another era, before the 2008 financial crisis.
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 the number of debt buyouts.
Executives, finance director, investment manager or communications 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 soared – making a profit of almost 200% .
Through a succession of skillful operations, most then benefit from a “tax suspension”, a device created to promote economic activity, allowing the tax on these capital gains to be deferred.
Solfur had become disastrous for many executives, especially after the subprime crisis, and soon sparked the revolt of an administrator, cousin of Ernest-Antoine Seillière, and legal proceedings in shambles.
Then, in December 2010, executives were notified of a grueling 240 million recovery. For the Tax Authorities, which will take legal action in 2012, this is an “abuse of rights”: the misuse of a legal means.
It is “one of the most significant tax frauds (ever) prosecuted by a criminal court,” according to the PNF, which described an “artificial meeting”, deliberately “complicated”, with an “exclusive tax purpose”.
Through other mechanisms, mentioned in the email exchange, this tax deferral could also have become permanent, the PNF argued.
One of the problems in the case is to establish whether or not the suspects intend to commit fraud: highly qualified, they are not “Madame et Messieurs Jourdain” who would commit tax evasion “without realizing it”, ironically became the accusation brushed aside.
In good faith
On the contrary, defendants alleged in good faith that they believed they could benefit from this tax regime given the jurisprudence of the time, supported by the expertise of the renowned law firm Debevoise & Plimpton.
Solfur’s main beneficiary with EUR 116 million, Jean-Bernard Lafonta is also being tried for complicity in the fraud of his co-defendants, on suspicion of “supervising” the meeting and “forcing the hand” of certain executives.
“Absurd”, the bar assured the person who resigned from Wendel in 2009 following this affair and the controversial turnout in the capital Saint-Gobain.
After years of litigation, nearly all of the defendants entered into a transaction with the tax authorities, some of which were reimbursed millions of euros based on the first correction.
JP Morgan bank, which had provided large loans to executives under Solfur, was also fired for complicity in tax evasion. She agreed in September to pay a fine of 25 million euros through a court settlement to close the proceedings.