Capitalist Scam

The bankers' flight back

With some of France's best legal and economic minds at its disposal, President Franc,ois Mitterrand's Socialist Party had a full decade to plot how to fulfill a key campaign promise: the nationalization of major industries and private banks. Yet by the time the National Assembly approved the first batch of takeovers last week, 332 to 154, capitalists had found an embarrassingly gaping hole in Mitterrand's plan and put one of French banking's most glittering prizes out of reach of the Socialists.

At issue was the future of the second largest bank on Mitterrand's hit list, the dynamic Compagnie Financiere de Paris et des Pays-Bas (Paribas), with assets of $52.2 billion in 1980. After his election last May, Mitterrand expected companies and banks targeted for nationalization to refrain from transferring assets out of the country. But he never made it illegal for them to do so. Seizing on that loophole, Paribas reduced its stake in its Swiss subsidiary, Paribas Suisse S.A., from 72% to less than 50%, thus allowing other interests to gain control. While this was going on, a little-known Swiss holding company named Pargesa S.A. was receiving what seemed to be a miraculous infusion of capital: its assets ballooned from $25,000 to $140 million in a month's time. The owners of the newly rich Pargesa, it turned out, were the Becker Group Inc., an American subsidiary of Paribas, together with Canadian, Belgian and Swiss interests that had close ties to Paribas. Pargesa quickly moved to buy control of Paribas Suisse. As a result, when the French government completes the nationalization of Paribas, it will gain only a minority holding in the bank's profitable subsidiary. A similar operation succeeded last week in keeping Cobepa, the bank's major Belgian unit, out of the French government's hands. Thus the mother bank has now lost almost one-third of its foreign assets.

When first word of all this got out during the debate on nationalization, the Socialists accused Paribas Chairman Pierre Moussa, 59, of what Premier Pierre Mauroy called a "shocking lack of civic spirit." In the ensuing scandal, Moussa was forced to resign.

For the rookie government of Francois Mitterrand, the incident served as a brutal introduction to the multinational league. Last week Paris hastily plugged the loophole through which the bankers had slipped some of the brightest jewels in the Paribas crown.

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