Stephane Richard, chief executive officer of Orange SA, arrives at the Elysee Palace in Paris, France. (Photographer: Christophe Morin/Bloomberg)

French CEO on Trial After $456 Million Payout, Sale of Adidas

(Bloomberg) -- Stephane Richard won’t be the star of a month-long fraud trial that starts this week in a Paris courtroom, but his role as head of one of France’s largest companies hangs in the balance.

The criminal trial of businessman Bernard Tapie on charges of fraud and embezzlement has swept up the chief executive officer of Orange SA and four others. Richard is accused of aiding and abetting Tapie’s alleged scheme to cheat France out of 403 million euros ($454 million) in a decade-old arbitration case, and may resign from his position at Orange if he’s found guilty.

The case stems from Tapie’s displeasure with Credit Lyonnais’s handling of the 1993 sale of his majority stake in Adidas AG. He alleged that the state-owned bank cheated him, and litigated the claim for years in several venues. In 2007, then finance minister Christine Lagarde agreed to put the dispute into arbitration, and has said she relied on Richard, her chief of staff at the time, to oversee the preparation of the process, which led to the multi-million-euro award for Tapie the following year. She was found guilty of negligence in a separate trial in December 2016.

French CEO on Trial After $456 Million Payout, Sale of Adidas

Judges at a special court for ministers ruled that Lagarde, now the managing director of the International Monetary Fund, should have done more to overturn the payout, especially after learning that it included 45 million euros in damages for Tapie. The entire payment was eventually blocked when doubts were raised on the impartiality of one of the three arbitrators.

Orange Career

Since he took over the helm of France’s dominant phone company in 2009, Richard has calmed labor tensions after a wave of employee suicides and restored the company’s competitive footing in the country following a sustained assault by low-cost challenger Iliad SA. Orange’s domestic business has been growing again for the past two years.

French CEO on Trial After $456 Million Payout, Sale of Adidas

Tapie’s trial is set to last until April 5, but 57-year-old Richard won’t attend the whole time. The Orange CEO is expected to face focused questioning about his role in the decision to go to arbitration rather than court.

Florian Silnicki, founder of political communications agency LaFrenchCom, expects France’s business culture to change, moving toward a Anglo-Saxon mentality. An executive in the U.S. or U.K. in a similar situation would be expected to step aside by investors, he said.

In France, CEOs keep “their jobs even when they’re ordered to face a criminal trial,” Silnicki said. “There’s going to be an ever greater focus on making sure a company’s reputation is waterproof, so any factor that can harm that will be swept away.”

Possible Sentence

The fraud charges against Tapie and the aiding and abetting charges Richard faces carry the same maximum penalty: Seven years in prison and a fine of 100,000 euros. A ruling should be released in several months.

Jean-Etienne Giamarchi, a lawyer for Richard, said his client is ready to fight the charges.

“He’s impatient to be in a position to explain himself publicly and intends to show that the accusations against him are baseless,” his lawyer said in a statement.

An attorney for Tapie, Herve Temime, declined to comment ahead of the trial. Tapie, who owns French media group La Provence, made no statement to the press upon arriving in court, Agence France-Presse reported.

Shareholders, including the French state, rewarded Richard with a second four-year term last May, though Finance Minister Bruno Le Maire said earlier the executive would have to resign if convicted. The telecommunications firm decided not to appoint an interim leader during the trial, saying in December that deputy CEOs Ramon Fernandez and Gervais Pellissier had the “same powers” as their boss.

Silnicki says Richard won’t have much time to deal with Orange’s day-to-day business.

CEO Duties

In her trial two years ago, Lagarde shifted blame onto Richard. She said it was her choice to use arbitration to quickly resolve a dispute that had already cost tens of millions of euros in legal fees. But Lagarde also said she “relied” on Richard to screen thousands of documents and provide suggestions in a process begun months before she took office.

The shadow of Nicolas Sarkozy, then France’s president, loomed in the Tapie case but the 64-year-old refused to testify and was never investigated. He cited the French Constitution, which prevents presidents from being interrogated or prosecuted when in office to preserve the presidential office and the role of head of state that it entails.

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