Judgment on Wednesday for the former board members and managing directors of Wendel

published on Monday, April 18, 2022 at 09:17

Did they knowingly participate in a sophisticated financial arrangement designed to cheat the tax authorities out of colossal sums? The Paris court will deliver its verdict on the former Wendel leaders, including former Medef president Ernest-Antoine Seillière, on Wednesday.

Fifteen years after the events, the judiciary is ruling on a profit-sharing scheme called Solfur, which in 2007 allowed fourteen managers and executives to make a combined net profit of €315 million without being taxed.

The National Public 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 then chairman of the supervisory board.

The man, who was head of Medef from 1997 to 2005, said he was “outraged” to be on trial and, like all the defendants, defended himself vigorously for fraudulently paying around 30% of the taxes on his stake in Solfur – 79 – wanted to evade millions of euros.

Prosecutors asked for five years in prison, including three fixed ones — a non-adjustable sentence, for former CEO Jean-Bernard Lafonta, 60, who has since co-founded the HLD fund.

Sentences of up to two years were demanded against eleven senior employees and a former tax lawyer accused of complicity, for all of them a fine of 37,500 euros and professional bans.

The January-February trial, with technical or even Byzantine debates, plunged the court back into another era before the 2008 financial crisis.

– “Artificial Montage” –

In the early 2000s, Wendel, a steel company founded in Lorraine in 1704 and turned into an investment company, experienced a change in strategy with the arrival of a young boss, Jean-Bernard Lafonta, which multiplied the number of debt takeovers.

Executives, finance directors, investment managers or communications directors invested in Solfur in 2004 and three years later, in parallel with a reorganization of the group, became owners of 4.6% of Wendel, whose share price soared – they make a profit of almost 200%.

Through a series of shrewd operations, most then benefit from a “tax deferral,” an economic stimulus tool that allows taxation of these capital gains to be deferred.

Solfur, which had become disastrous for many executives, particularly in the wake of the subprime crisis, quickly sparked the rebellion of an administrator, Ernest-Antoine Seillière’s cousin, and a court case in shambles.

Then, in December 2010, executives were notified of a hefty $240 million reclamation. For the tax authorities, which will take legal action in 2012, this is an “abuse of rights”: the diversion of a legal means.

It was “one of the most significant tax evasions prosecuted (ever) before a criminal court,” according to the PNF, which described an “artificial, intentionally ‘complex’ meeting with ‘exclusive tax purposes’.”

The PNF argued that other mechanisms mentioned in the email exchange could have made this tax deferral permanent.

One of the sticking points in the case is whether or not the defendants were found to be fraudulent: Ironically, they were not highly qualified “madame et messieurs jourdain” who would commit tax evasion “without realizing it” .

– With good intentions –

Rather, the defendants alleged that they believed in good faith that they could benefit from this tax arrangement in view of the jurisprudence of the time, supported by the expertise of the renowned law firm Debevoise & Plimpton.

Solfur’s main €116 million beneficiary, Jean-Bernard Lafonta, is also facing charges of aiding and abetting the fraud of his co-defendants on suspicion of “supervising” the gathering and “forcing the hand on” certain executives.

“Absurd”, assured the law firm Wendel in 2009 in the course of this affair and the controversial promotion to the capital of Saint-Gobain.

After years of litigation, almost all of the accused concluded a deal with the tax authorities, and some of the millions of euros paid on the basis of the first adjustment were reimbursed.

The JP Morgan bank, which had made massive loans to managers as part of Solfur, was also fired for aiding and abetting tax evasion. In September she agreed to pay a fine of 25 million euros via a court settlement in order to drop the case.

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