Orange CEO in Custody for French Arbitration Probe

Photographer: Balint Porneczi/Bloomberg

France Telecom SA's Orange logo is seen on display at a mobile phone store in Paris. Close

France Telecom SA's Orange logo is seen on display at a mobile phone store in Paris.

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Photographer: Balint Porneczi/Bloomberg

France Telecom SA's Orange logo is seen on display at a mobile phone store in Paris.

Stephane Richard, chief executive officer of France Telecom SA (FTE), also known as Orange, was taken into custody today for questioning in a case involving an arbitration that benefited a supporter of former President Nicolas Sarkozy.

Richard was chief of staff of former Finance Minister Christine Lagarde when the Bernard Tapie arbitration decision was made. He can be held for as long as 24 hours in the first phase of the process, before prosecutors determine whether they want to question him further, Agnes Thibault-Lecuivre, a spokeswoman at the Paris Prosecutor’s office, said in a telephone interview.

There is “no question” of replacing Richard as CEO of France Telecom, which will change its name to Orange on July 1, company spokesman Jean-Bernard Orsoni said in an e-mailed response to queries. Richard being taken into custody is “routine procedure in a case as complex as this one,” he said.

Tapie, a businessman who endorsed Sarkozy’s successful presidential effort in 2007 and failed re-election bid in 2012, in 2008 won a 385 million-euro ($509 million) arbitration award to settle a dispute over his company’s sale of German sportswear brand Adidas AG. (ADS) Tapie accused then-state-owned bank Credit Lyonnais of cheating him while handling the sale.

Lagarde refused to appeal the decision at that time, saying “a very large majority” of the money would return to the state through the creditors’ claims. The court named her a key witness without charging her on May 24 after two days of questioning.

Lagarde Questioning

Lagarde, who has denied any wrongdoing, was heard by the Cour de Justice de la Republique, which focuses on ministers’ actions in office. The court was looking into whether she erred in agreeing to the Tapie arbitration. Her status as a material witness means Lagarde can be charged in the case later.

The court opened its investigation into whether there was “complicity in forgery” or “complicity in misuse of public funds” in the case in 2011, soon after Lagarde became the managing director for the International Monetary Fund.

Richard, a 52 year-old Frenchman who became CEO of France Telecom-Orange in 2010, was chief of staff to the French finance minister between 2007 and 2009.

In January, he confirmed that police had searched his home as part of the Tapie inquiry.

French Industry Minister Arnaud Montebourg on Friday was cited by French daily newspaper Le Monde as saying Richard should quit his job as chief of France Telecom, which is about 27 percent owned by the French state, if charged in the Tapie case. Montebourg later denied making any statement to Le Monde.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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