Wednesday, April 10, 2013

The Transparency Circus

For once I agree with Jean-Luc Mélenchon. On France2 last night, he denounced the current rush by deputies to publish their balance sheets as un attrape-nigaud. Without controls, without investigative authority, without specific sanctions for prevaricating, anyone can declare anything and get away with it. Jérôme Cahuzac could have listed his "patrimony" as consisting of a modest apartment and a tiny bank account, and no one would have been the wiser (except that the address of his apartment might have suggested a different valuation). The absence of a Swiss bank account could not have been verified.

The president has now announced measures to establish some legal parameters for these disclosures, but the whole project leaves me uneasy. As several deputies have alleged (mainly on the right, to be sure), it suggests an animus against wealth itself. This is foolish. As Le Monde points out, a deputy's pay already puts him or her in the top decile of French earners. A minister's salary is even higher, and there are the perks of office. So these poormouthing declarations are scarcely believable. Am I supposed to be reassured that one deputy lists his wealth as consisting of a small apartment and a bank account of 5,000 euros on a salary of 7,000 euros a month? Shouldn't I question his poor money-management skills? Where did it all go? Is he keeping a mistress or drinking his income? Should I trust such a man with the management of the nation's finances when he can't seem to put any money of his own aside? These aren't the questions we ought to be asking of candidates.


bernard said...

Of course the present rush does seem like a general effort at CYA. Still, with or without a law, Cahuzac could have "forgotten" to mention his foreign bank accounts and the amounts involved - which we still have no idea about - and finding this omission would have been just as difficult. I don't think a law will resolve the problem of disproving a negative. I would much prefer a vetting process as in the US for all senior officials.

Mitch Guthman said...

I'm also curious about something else regarding Cahuzac's UBS account. I've seen published reports which I read (possibly incorrectly) as saying that, at one point, it contained as much as 15 millions euros.

I know the guy was a really successful plastic surgeon or whatever but that's an awful lot of money to accumulate in a Swiss bank account. Especially since that would represent what's left over after expenses and taxes. Anybody know if that's the correct amount that was in the account and, if it was, what he did to get it?

Art Goldhammer said...

Mitch, The 15 million figure, reported by Swiss TV, has not been corroborated. If he did have that much in his account, it came, most likely, not from his practice but from consultancies with pharmaceutical firms. One thing the judges will be looking at is what he did when he worked for the health ministry. Did he render services to these drug companies in return for cash?

Anonymous said...

Á propos: :)

Mitch Guthman said...


Thanks for filling me in. I’ll try to wait before passing judgment on Cahuzac until the 15 million euros is confirmed. But I can’t resist the urge to speculate a bit. If the 15 million euros figure is even remotely accurate whatever “consulting” he may have done must have been astonishingly valuable given that whatever is in the UBS account represents the remainder of his total income less business expenses, living expenses and legitimate savings over the years since the account was opened.

The other, obviously related, question is the source of the money in the UBS account and how it was deposited. Whether or not the 15 million euros figure is correct, it’s probably a substantial amount of money. If the deposits were made in cash, I can’t imagine where either a surgeon or a consultant would get so much cash. I seriously doubt whether people pay for their medical operations in cash and I assume that the pharmaceutical companies don’t pay their legitimate “consultants” in cash, either.

But the more interesting question might be the source of the deposits if he didn’t make them in cash. Let’s assume he didn’t write a check on his own current account because that obviously defeats the whole point of having the UBS account. I doubt he could easily persuade a friend or employee to put checks (payable to him but maybe endorsed to cash) in a bank account and then write him a check since the result would be a huge tax liability for deposits that would have to be reported as income. Also, the scheme couldn’t withstand the slightest scrutiny because these transactions would stand out like a sore thumb in an audit of anybody in the chain and the money flow would be laughably easy to follow.

Yet, I can’t see Cahuzac using a professional money launderer to buy cash or the checks from his consulting clients just to conceal the money from the taxman—I don’t know what the going rate is in France but when I was working in Louisiana it was upwards of 30% so that seems counterproductive (Also, do you know if France has some equivalent of the Form 1099). So how did the money get to UBS? UBS quite likely has a record of the deposits so this should be a very easy question to answer.

To summarize: If what went in to Cahuzac’s UBS account was cash, we’re likely talking about trash bags full of money. Where’d he get so much cash? If by check, whose checks and why were they written? As always—follow the money.

So I think the amount in the UBS account is critical. If it’s a few hundred grand, well, maybe he skimmed it to cheat the taxman and he’s a great big hypocrite. My guess is that anything in the millions makes him a whole nother breed of cat.

Art Goldhammer said...

Mitch, Don't forget that Cahuzac used the services of an agent, a friend of Marine Le Pen's, to open the account. This agent had a partnership with the Reyl Bank in Switzerland. Payments from drug companies to Cahuzac could have been funneled directly to shell companies in Switzerland in exchange for fictitious services, or to the agent for legal services, etc. I don't think bags of cash are the preferred method in this world of sophisticated money laundering.