Wiretaps Show French Crackdown on Insider Trading

(Bloomberg Businessweek) -- It was a busy Thursday, and Stephane Fima was on edge. After wrapping up a conference call with colleagues, the Société Générale SA managing director rang his friend Thomas Seligman. Fima stammered that he was worried and wanted “to stay safe,” then started reading a series of seemingly random figures. “Just write them down,” the banker said, before asking Seligman if he had another phone.

“This one is safest,” replied a perplexed Seligman. “We haven’t used it in eight months.”

“Fine, I’ll call back in five minutes,” Fima said.

Neither of them knew it, but police were listening to those November 2015 phone calls. French authorities had been seeking evidence in a sprawling inquiry into suspicious trades in more than a dozen securities, including ad agency Publicis Groupe, automaker Peugeot, and cement producer Lafarge.

The investigation, France’s biggest-ever probe of insider trading, marks a major departure in a country where the offense has typically been dealt with as if it were a civil violation. With a handful of exceptions, authorities haven’t aggressively pursued such cases and have had scant success when they’ve taken them to court.

French authorities are aiming to improve on that record in the case involving Seligman and Fima, more than a decade in the making. Since 2007, France’s Autorité des Marchés Financiers had seen suspicious trades in the days before merger announcements or corporate profit warnings, with one suspect in 2014 reaping €20 million ($23 million) from a single tipoff. The central question: Who was providing the information?

This story is based on court documents, a transcript of wiretaps obtained by Bloomberg, and dozens of conversations with people involved in the probe who have asked not to be identified because details of the case remain confidential.

Seligman, the former owner of the hair salon at the €1,000-per-night Hotel Le Bristol in Paris, had come to the attention of police as the potential hub of a network funneling secrets to investors. With authorization to tap a number traced to him, they listened in on Seligman’s calls and began to piece together the role of Fima, a specialist in acquisition finance at SocGen.

A few minutes after the first call on that November day, Seligman stopped alongside the highway from Paris to Normandy, still trying to make sense of the numbers. Fima dialed him again, telling Seligman to write 1, 9, 18, then “further on” 12, 9, 17, 21—and on and on.

“It’s really easy. Have you heard of the thing that goes A equals 1, B equals 2?” asked Fima.

“Ummmm,” Seligman stammered.

“Let’s just call it a brain-teaser for you tonight.”

“Right, but are there any elements I can build on?”

“I told you. For now, I have the two names.”

“Right, OK. Two names.”

“I’ll try to get more. But I’ve never seen such a level here.”

“Of security?”

“Yeah, never.”

From the rain-drenched highway, Seligman then rang Lucien Selce, a financier in Geneva, to report on his conversation with Fima, but neither could crack the code. Seligman called Fima again and groused that the numbers still “make no sense.”

An exasperated Fima said, “You’re really bad at math,” then finally blurted out the information he’d sought to conceal with the code.

“It works. But whatever. You’ll see. Um … Air Liquide.”

“Ah, OK, yes.”

“On Airgas in the U.S.”

“So, all of that is Air Liquide USA?”

“No, no, no. What I’ve just told you is the name of the French company.”

“Yes. And Airgas?”

“It’s the other one. The other one.”

“It’s the American firm?”


Chemical producer Air Liquide SA was indeed working on an acquisition of U.S. rival Airgas Inc. in what ultimately would be a $13 billion deal. Investigators say Seligman passed the information to Selce, who had reason to fear he was on police radar. A year before the conversation, U.S. authorities—­acting on a request from France—had served Google a subpoena seeking access to Selce’s emails as part of a probe into suspected insider trading involving a profit warning from energy company GDF Suez SA.

Fima, Seligman, Selce, and four others have been charged over trades of Airgas shares in a procedure triggered when there’s “serious and consistent” evidence showing likely involvement in the matter under investigation. The next step typically would be for lead investigator Clément Herbo to order a trial, but that could take ­several more months as judges examine challenges from the suspects. If convicted, they risk up to two years in jail and fines of 10 times any profits they made. France’s financial prosecutor, the Parquet National Financier, and attorneys for Seligman and Selce declined to comment. David-Olivier Kaminski, an attorney for Fima, said his client “feels he was used by Seligman” and had no idea anything they discussed might have been used for illicit purposes.

Key to the investigation are the recorded phone calls. The day after the failed effort to break the code, Fima told Seligman that an indiscreet colleague had let slip a potential acquisition by Air Liquide and that he’d seen the Airgas name on documents around the office. Later, Fima lamented that he’d failed to glean anything of interest from one of his favorite tricks: digging through the candy wrappers, half-empty coffee cups, and banana peels in colleagues’ wastebaskets for information on deals. A few days later, he got lucky when an assistant called in sick. She’d failed to encrypt credit application files on the bank’s server, allowing Fima access to documents he normally wouldn’t be privy to—­including details such as the target price of $140 per share for Airgas and strong clues about the date the deal was likely to be announced.

The sale would remain confidential for another week. But the trio continued talking—giving investigators ever more evidence as Seligman shared the information with others and Selce promised to call various contacts to verify the tip. When news of the Air Liquide-Airgas deal finally broke on Nov. 17 just after 6 p.m. Paris time, Seligman phoned Fima and read out a TV headline confirming the deal: “It’s a Goal! Air Liquide in Talks to Buy Airgas.”

“Yum, yum,” replied a laughing Fima.

Seligman then rang Selce and, in a line worthy of The Wolf of Wall Street, asked, “Are your balls quivering with excitement, my friend?”

A few days later, Selce said Seligman and Fima would get $966,000 to split. While Selce’s gains are unclear, court documents show someone known as “the Cowboy” made €4.4 million from the information. And an unidentified person tipped off by Seligman told him that he thought he made about €2.3 million from trading on the Air Liquide steer.

Profits in hand, Fima suggested that they all change SIM cards and phones before planning their next coup. Seligman proposed lunch at Hanawa, a pricey sushi restaurant just off the Champs-Elysées, to celebrate and trade their new phone numbers to hide them from eavesdroppers. After the meal, Seligman rang Selce—still with the phone he’d been using to discuss Air Liquide—and said Fima had hinted at a massive acquisition involving hotel chain Accor SA, though he cautioned negotiations could take months.

The banker would be out of commission before the talks wrapped up. On Jan. 14, 2016—eight weeks after the Air Liquide deal—police burst into SocGen’s 37-story headquarters in the La Defense business district west of Paris to comb through Fima’s office and bring him in for questioning. The bank fired him shortly thereafter, and he’s now working as a consultant for startups while he fights the charges.

To contact the editor responsible for this story: David Rocks at drocks1@bloomberg.net

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