Tax fraud: suspended sentences for former Wendel executives

Posted Apr 20, 2022, 5:26 PM

Above all, keep a low profile. At the end of the hearing, after having been sentenced for massive tax evasion to the maximum of the fine incurred at the time and to suspended prison sentences, the former leaders of Wendel, including the former president of Medef , Ernest-Antoine Seillière, had no comment. As if after fifteen years of bitter legal battles, the reasoned judgment delivered this Wednesday by the Paris court would allow them to turn the page and quickly move on.

In 2007, a program called Solfur enabled these fourteen managers and executives to make a total gain of 315 million euros, net of tax. Enough to put a flea in the ear of the tax administration which had notified them at the end of 2010 of a tax adjustment of 240 million euros, with penalties, for an “abuse of rights”. After years of litigation, almost all of them have now settled a negotiated amount – and lower – to the Treasury.

Abuse of rights

Was the characterized abuse of rights therefore constitutive of tax evasion which requires a certain intention on the part of the protagonists? That was the whole point of the trial. For the court, the considerable profit pocketed by the managers and linked in particular to the skyrocketing of the Wendel action between 2004 and 2007, was placed “artificially” under the “suspended taxation” regime, allowing the taxation to be deferred. .

Thus, the defendants crossed the “border” between “optimization” and “tax evasion” and “misguided” a legal device, designed by the legislator to facilitate corporate restructuring and economic activity, asserts the president Benedicte de Perthuis. Hard to believe that “all these polytechnicians, enarques” did not have the means to know that they were taking a tax risk. The defendants therefore had “the intention” to commit fraud so as not to be taxed at around 30%, according to the court.

The former president of Medef, Ernest-Antoine Seillière, was given a three-year suspended prison sentence and a fine of 37,500 euros, the former boss of the investment company, Jean-Bernard Lafonta, “the instigator editing” for the court, was given a four-year suspended prison sentence. Eleven other executives and a former tax lawyer were given sentences ranging from suspended fines to suspended prison sentences plus a fine of 37,500 euros, the maximum fine incurred at the time. They have ten days to appeal.

“Instigator of the assembly”

The sentences handed down are however below the requisitions of the National Financial Prosecutor’s Office (PNF), which had requested prison sentences (four years in prison, including two years in prison, against Baron Seillière, and five years in prison including three years firm for, Jean-Bernard Lafonta) for these “Misters Jourdain of tax evasion” who would have committed “tax evasion without knowing it.

During the hearing, Ernest-Antoine Seillière, 84, said he was “outraged” to find himself in court and defended against any tax concealment (on an amount of 79 million concerning him) saying he was convinced, in 2007, the legality of the financial scheme. Same arguments used by Jean-Bernard Lafonta, 60, who had also disputed having “imposed” the assembly – of which he was the main beneficiary with 116 million euros – on other executives. “No one would have imagined for a moment that this subject could have a criminal dimension”, he was offended at the bar.

Sleight of hand

In 2004, the purpose of the ultra-sophisticated assembly was to transform the ancient Wendel empire into a modern investment company by infusing it with a management incentive mechanism. Thanks to a legal sleight of hand, the management had become the owner of perfectly liquid Wendel Investissement (WI) shares at the highest level on the market.

But in order for the shares to constitute a “motivating” incentive, the executives had recourse to the so-called “contribution-assignment” mechanism, which is perfectly legal: they contributed their shares to companies (often empty shells, as the survey will show), this which deferred the tax to be paid until their dissolution or resale.

Finally, to have cash more quickly, several had decided to take out loans from JP Morgan. The bank, sued for a time, accepted in September 2021 a negotiated procedure with the PNF and paid 25 million euros to avoid a trial. The tax and legal saga finally seems to be coming to an end.

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