PARIS — Three allies of President Nicolas Sarkozy of France on Friday found themselves the focus of an expanding investigation into a 17-year-old case involving suspected corruption in the sale of submarines to Pakistan.
The inquiry has gathered momentum at a difficult time for Mr. Sarkozy, only seven months before he is to seek re-election.
The case, known here as “the Karachi Affair,” centers on kickbacks that investigators suspect were paid to secure the sale of three submarines to Pakistan in 1994 and then used to help finance the presidential campaign of former Prime Minister Edouard Balladur in 1995.
On Thursday, the police arrested one of Mr. Sarkozy’s allies, Nicolas Bazire, who was a witness at his wedding to Carla Bruni in 2008 and was also Mr. Balladur’s campaign chief in 1995. Mr. Bazire was accused of complicity in the misuse of public money.
Earlier this week, the police also arrested Thierry Gaubert, Mr. Sarkozy’s financial adviser in 1994 and 1995, when Mr. Sarkozy was a budget minister and a spokesman for Mr. Balladur. Investigators are probing possible connections between Mr. Gaubert and Ziad Takieddine, a Franco-Lebanese businessman who was charged with fraud last week over arms contracts with Pakistan and Saudi Arabia.
After questioning, Mr. Bazire and Mr. Gaubert were released.
In another development that could pose the most damage to Mr. Sarkozy, Paris prosecutors said Friday that they would open an investigation into accusations that Brice Hortefeux, a former interior minister who is likely to run Mr. Sarkozy’s presidential campaign next year, might have broken the law by obtaining access to the investigation into the submarine sales and then contacting Mr. Gaubert.
According to transcripts of telephone conversations published in French newspapers, Mr. Hortefeux called Mr. Gaubert before his arrest and warned him that his wife had “given up a lot” when she was questioned by the police as part of the investigation into the Karachi Affair.
“She was interviewed,” Mr. Hortefeux said, according to the published transcripts. “She knows. She was aware of your activities.”
Mr. Sarkozy has repeatedly denied any knowledge of suspect financing in Mr. Balladur’s campaign and any involvement in illegal financing arrangements. On Thursday, the presidential palace issued a statement saying that Mr. Sarkozy’s name appeared nowhere in the investigation’s files.
“All the rest is slander and political manipulation,” the statement said.
In 1994, France signed a contract for the sale of three Agosta 90B submarines to Pakistan, for about $1.1 billion. The contract also included provisions for about $111 million in commissions, which were then deemed legal, to be paid to Pakistani and French intermediaries.
After Jacques Chirac was elected president in 1995, he pushed to change the law and also stopped payment of the commissions, which he suspected of having involved kickbacks to French officials, including Mr. Balladur, who had become a bitter political enemy.
An investigative judge began looking into the submarine sales to Pakistan in 2002, after a terror attack in Karachi killed 11 French technicians involved in the construction of the ships.
The attack was originally thought to be the work of Al Qaeda, but a government report in 2002 suggested that it might have been organized by Pakistani officials who were angered by Mr. Chirac’s decision to stop paying the commissions.
On Friday, the arrests of Mr. Bazire and Mr. Gaubert appeared to shake Mr. Sarkozy’s governing party. The newspaper Le Figaro quoted anonymous Sarkozy supporters saying that they were concerned about the potential damages the investigation could cause. Others saw it as a political tactic to hurt Mr. Sarkozy before the presidential election in May.
Prime Minister François Fillon issued a statement on Thursday denouncing “the insidious and slanderous attacks aimed at the president.”
Members of the opposition Socialist Party had a different view of the arrests. Martine Aubry, a candidate for the Socialist Party’s nomination for president, described the Karachi Affair as “certainly one of the most serious in the Fifth Republic.”
Article source: http://www.nytimes.com/2011/09/24/world/europe/allies-of-french-president-are-questioned-in-graft-inquiry.html?partner=rss&emc=rss