(Bloomberg) -- Mondays are never easy. But there’s one Monday morning Patrick Jaïs has been trying to erase from his memory -- or at least from legal existence -- for half a decade.
On a sunny morning in March 2014, French investigators stormed his Neuilly-sur-Seine home west of Paris. The officers rifled through his and his wife’s mobile phones as well as his personal laptop in a raid meant to shed light on insider-trading suspicions linked to a longtime friend’s activities.
Right about the same time, another group of investigators turned up at the Paris law firm just off the Champs-Elysees where Jaïs, 60, is a partner specializing in mergers and acquisitions. A police officer there quickly secured access to his office to prevent evidence tampering.
“It’s a first,” Jaïs’s attorney, Eric Deubel, said at a court hearing last month, pointing out that investigators at France’s civil markets regulator had never raided a lawyer’s offices or home before.
Connecting Dots
While Jaïs hasn’t been accused of any wrongdoing, the lawsuit challenging the validity of the raids at his office provides a window into the origins of a much larger criminal probe into suspicious trades linked to a dozen securities, including ad agency Publicis Groupe SA and bank Natixis SA.
For years, French investigators have been trying to connect the dots between members of a loose network of traders thought to have cultivated ties to bankers or lawyers and shared tips via burner phones to avoid detection. British authorities joined the fray along the way -- and secured two convictions -- while the U.S. has its own separate probe.
But the French case began more discreetly, focusing on a sharp dip of GDF Suez shares in 2012. Jaïs wasn’t initially on the radar of market regulators at the Autorite des Marches Financiers until investigators received a mysterious handwritten note in mid-2013. In the letter, Jaïs’s brother-in-law claimed he’d heard that a Geneva trader and friend of Jaïs, Lucien Selce, was getting confidential tips from the lawyer.
Brother-in-Law
Jaïs has denied the accusations in court filings and said the letter was sent by his brother-in-law as part of a personal vendetta.
Frederic Peltier, a lawyer for Selce, said he’s not aware of any GDF case involving his client. Selce has always denied involvement in any insider trading.
The bad blood has to do with a messy divorce and custody fight between Jaïs’s current wife and her previous husband, according to people familiar with the matter. The brother-in-law testified against Jaïs’s wife -- his own sister. To counter the claim, Selce wrote a letter to the judge vouching for Jaïs’s wife and saying the brother-in-law was a convict who couldn’t be trusted, the people said. That prompted the brother-in-law to retaliate with the letter to the AMF.
Selce’s lawyer declined to comment on the custody case. Attempts to find contact details for Jaïs’s brother-in-law were unsuccessful.
The M&A lawyer hasn’t been charged and one of the two raids -- the search of his home -- was voided by a court of appeals in 2015 on procedural grounds. The current lawsuit focuses solely on the office raid. Jaïs and Deubel haven’t responded to calls seeking comment since the Sept. 26 hearing.
But, when the AMF got the letter in 2013, it seemed it might provide a breakthrough. At the time, investigators were hunting for evidence that Selce might have been tipped off about a profit warning GDF Suez issued in December 2012 that made the utility’s shares drop as much as 16%, according to court documents in the Jaïs lawsuit. Selce and his business partner were suspected of having illegally pocketed 1.8 million euros ($2 million) on the dip, according to a previous ruling in the case.
The AMF’s first move was to raid Selce’s chalet in an upscale French ski resort and also to look into a Rothschild banker who might have had access to insider information on GDF. Both lines of inquiry led nowhere, so AMF investigators sought permission from a judge to conduct searches at Jaïs’s home and office.
Paris Law Firm
While GDF wasn’t a client of his, Jaïs could well have had access to insider information about the profit warning, AMF officials reasoned, according to court filings in Jaïs’s lawsuit. He was a partner at the prestigious Paris law firm De Pardieu Brocas Maffei, which has represented GDF at times, according to documents in an unrelated tax case.
Investigators also found evidence of money transfers between Jaïs and Selce. But the M&A lawyer says in court filings that his friend simply loaned him 150,000 euros to settle a tax bill and he’s paid him back since then.
The French markets regulator may have also had an ax to grind. Aside from M&A and private equity work, Jaïs was sometimes a defense lawyer in market abuse cases opposing AMF investigators. Just a few months before his home and office were raided, Jaïs had won a lawsuit against the regulator overturning fines totaling 4.7 million euros in a case involving two hedge funds. Representatives at the AMF didn’t respond to requests for comment.
‘So Insignificant’
In the end, the Jaïs steer may have been fruitless. Deubel, his lawyer, said the raids at the M&A lawyer’s home didn’t provide any useful information and the law firm inspections turned up just one document that Jaïs deemed “so insignificant” that he voluntarily provided it to the court.
But investigators persevered, following information from other sources that led to additional Selce acquaintances. And by then French criminal authorities had joined the chase.
After several months, they took a keen interest in Selce’s friend, Thomas Seligman, a Paris hair salon owner. Police inspectors tapped a burner phone traced to him and listened in on his calls. They soon became convinced Seligman had acted as an intermediary between Selce and a Societe Generale SA banker with first-hand access to inside knowledge on large deals. The trio were charged in 2015 over suspicious transactions related to the $10 billion acquisition of chemical producer Airgas Inc. by French rival Air Liquide SA. The men have challenged the charges and no trial has been ordered.
Four others have also been charged in relation to the Airgas trades, including another acquaintance of Selce, Alexis Kuperfis. When police started tapping Kuperfis’ phone in late 2014, they discovered he was in contact with Walid Choucair, a suspect in a parallel U.K. probe. In June, Choucair was convicted and sentenced to three years for trading on tips from a friend at UBS Group AG.
French authorities shared the tapes with their British counterparts and the conversation was played at Choucair’s trial.
‘Big’ Investigation
There’s a “big f--king investigation,” Choucair warned Kuperfis. While Kuperfis’s name came up at the Choucair trial, he has not been accused of any wrongdoing by U.K. authorities.
Lawyers for Kuperfis declined to comment. Thibault de Montbrial, a lawyer for Seligman, also declined to comment.
But over the last five years, while the insider-trading investigations have dragged on, Jaïs has tried to get on with his life. He remains a partner in good standing at De Pardieu, which didn’t respond to requests to comment. And while Jaïs says the office raid didn’t support the AMF’s suspicions, he continues to fight to get it tossed out.
Jaïs contends that investigators didn’t do enough to protect his rights. He argues that while he was shown the search warrant on the day of the office raid, he should have also been given a copy of a lengthier document detailing the judge’s reasoning to authorize it. Losing this lawsuit would be a blow for the AMF and could require investigators to provide both documents during inspections.
“This is really a question of principle,” according to Deubel. A ruling in the case is scheduled for the end of the month.
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