Outraged French politicians have called for a new parliamentary investigation after an arbitration committee awarded a whopping €285 million to Bernard Tapie, the former majority shareholder of Adidas, over the controversial sale of the company in 1993 to another Frenchman, Robert Louis-Dreyfus.
The sum is to be forked out by the Consortium de Réalisation (CDR), an organization set up a few years ago to deal with the bad debts and other dubious assets of Crédit Lyonnais, a former state-owned bank. However, much of the money will flow back to the state’s coffers, because it will be used to pay debts that Tapie owes the government. His judicial triumph will drag him out of his personal bankruptcy and leave him with a net gain of €20 million to €22 million.
The decision by the three-member arbitration committee puts an end to a decade of proceedings. Tapie argued that he had been fleeced by Crédit Lyonnais because, as part of the 1993 deal, it virtually sold Adidas to itself. Louis-Dreyfus only bought 15 percent of BTF GmbH, a holding company that controlled 95 percent of Adidas, while the rest of the shares went to state-owned banks and two investment funds, at a price valuing Adidas at about 2 billion French francs (€304m-$475m). Furthermore, Tapie was apparently not informed that, as a side deal, Louis-Dreyfus obtained the right to buy the Adidas shares not owned by his group two years later, at a fixed price valuing Adidas at 4.4 billion FF (€670m-$1,045m). By November 1995, the stock market launch of Adidas valued the company at about 11 billion FF (€1.67bn-$2.6bn).
In September 2005, the Paris Appeals Court ruled in Tapie’s favor, ordering the CDR to pay compensation of €135 million. In October 2006, the French Court of Cassation overturned the ruling. But earlier this month the arbitration committee ruled against Crédit Lyonnais on two counts: because it failed in its duty of loyalty toward Tapie, and violated a rule that makes it illegal for a bank to offer assets and then buy them itself, either directly or indirectly. Tapie was awarded compensation of €240 million for loss of earnings and another €45 million for moral damage.
Incensed by the sheer size of the settlement, critics were quick to describe it as a political deal. Under normal circumstances the proceedings should have been referred back to the Appeals Court. Instead the chairman of the CDR agreed to arbitration, a procedure that is generally favorable to the claimant. French newspapers and politicians could not fail to point out that Tapie and Nicolas Sarkozy, the French president, have common friends. In any case, their attacks are chiefly aimed at the government and there are hardly any means for the arbitration to be reversed.
