The circumstances
On 16 September, 2000, an agreement was signed between Mistral Holding and Jacques Saadé. This agreement, as it first appeared, represented a “deferment” following the twists and turns of the conflict, thus preventing Jacques Saadé from suffering the grave consequences of a very heavy criminal case. The implementation of the agreement would bring all the proceedings instituted against him to an end. For Mistral, full enforcement of that agreement would protect its interests.
CMA-CGM’s balance sheets, forecasted accounts and results presented by Jacques Saadé during the signature of the agreement were used as a basis for determining Mistral’s stake in the shipping group.
Choucri El Khoury, the lawyer of the Saadé family, benefiting from the trust of all parties, was appointed, with Mr. Johnny Saadé’s approval, as the contractual executor of the said agreement.
But as soon as the agreement was implemented, irregularities started to appear. It turned out later that the appointed executor turned a blind eye to Jacques Saadé's prepared and premeditated dishonest conduct.
The offences
The first example of offence was Jacques Saadé's establishment of the company “Rodolphe Saadé Holding” even though the agreement prohibited him from doing so, and such a step was subject to a fine of $2,000,000.
On Mistral's insistence, the executor asked Jacques Saadé to strike off this newly created company but no penalty clause was applied, as it should have been, against Jacques Saadé. Another point: all the appendices to the agreement held by the executor disappeared.
Furthermore, the executor issued unjustified financial penalties against Mistral in a dishonest ploy to whittle away the funds remaining from the initial judgment.
Complicity
With the successive accumulation of violations and increased doubts, Mistral intensified its investigation into the practices of Choucri El Khoury and attempted to shed a light on the executor’s possible complicity with Jacques Saadé and the Merit Group.
Jacques Saadé's breach of trust and the executor’s deliberate leniency were proven. These facts legally imperiled the implementation and continuation of the agreement ...
On the 24th of April, 2004, Johnny Saadé denounced the agreement of the 16th September and asked for its cancellation.
Action for cancellation of the agreement
As stated above, the violations and illegal dealings that have accumulated since the agreement was implemented, in addition to Jacques Saadé's schemes via Choucri El Khoury, led Johnny Saadé to denounce the agreement. The proceeding is currently in progress.
In order to quote just a few excerpts from the report of the above Expert, we reproduce the following remarks:
In a chapter analyzing the report on the examination of Jacques Saadé by the investigating Judge in Nanterre on 11 June, 2003, we read:
"This report includes several sections each corresponding to a question asked by the investigator. We shall examine them one after the other, stating each of the points mentioned. Analysis of this "past" has, in my opinion, a scope which, beyond the actual history of the events, clarifies the hypotheses I subsequently make concerning the fraudulent dealings which could have occurred within the group if the same methods as those brought to light in this examination had been used."
Amongst the numerous examples that the Expert lists, some being very complex and technical, we reproduce the following comments:
"... the second paragraph refers to a commission of 129,000 USD paid by TEXACO to CMA International (London)”.
The reply from "the party being examined" is simple in every sense: « For reasons of confidentiality, Texaco did not want the amount of the discounts benefiting CMA to be known and made payment of these amounts in favor of CMA International...”
The two paragraphs leave me utterly perplexed.
But, let us make an assumption! TEXACO therefore requires confidentiality. Why would CMA S.A. not guarantee that confidentiality?
A bit further on, "the party being questioned" explains the flow of funds by: “..The objective ... to avoid paying taxes in Lebanon. I understand, if I read it right, says the Expert, that this would be tax fraud to the detriment of the Lebanese Government.”
If this party has defrauded the Lebanese tax authorities, has he done so with other tax authorities including that of France?
And, in the conclusion to this chapter on presumed fraud, the Expert states the following:
"If, on the one hand, one refers to the numerous findings set out above, particularly those deriving from the "questioning" of Jacques Saadé, but also, on the other hand, the episode concerning the "overvaluation" of ships, one could put forward the hypothesis, to be verified, certainly, but not devoid of interest, that a system of embezzlement through the payment of commissions, for example, might have existed to the detriment of CMA s.a., CGM s.a., or CMA-CGM ..."
And to assess the importance of the suspected sums, he continues:
"... in order to appreciate the hypothetical scope of such an alleged fraud, one may recapture, for 1999, the figure for the "External purchases and expenses", i.e. 447 million Francs + 6.889 million Francs = 7.3 billion Francs.
If, for the sake of caution, only a third of that amount is used, the figure of about 2.5 billion Francs would be obtained.
Based on that figure representing only a third of the expenses that may, according to our hypothesis, possibly include hidden commissions, two hypotheses concerning hidden commissions of 5% and 10% are put forward.
The result would be:
- At 5% = 2.5 billion Francs x 5% = 125 million Francs, i.e. 19 million Euros, i.e. 65% of the 1999 result;
- At 10% = 2.5 billion Francs x 10% = 250 million Francs, i.e. 38 million Euros, i.e. 130% of the 1999 result.
And once again I am not using any figures for the possible embezzlement related to the purchase of vessels."
This creates an uncertainty regarding the balance sheets.
Further in this report, we read:
“... We find that the forecasts used for the CMA-CGM merger turn out, in comparison with the actual figures, to be completely wrong and were so since the year following the merger with a realization of objectives of +211% for 2000, +158% for 2002, +375% for 2003 and +920% for 2004! The discrepancies appear to be enormous.
A certain margin of error may be permitted in forecasts, but the extent that they appear here in is astonishing. Unless, however, it were considered that this was done so as not to provide Johnny Saadé, still a 10% shareholder (2), with any reason to believe that CMA-CGM is worth a lot, which he would probably have been led to believe if the forecasts had been more coherent and closer to the truth."
And in that same report:
"…, Did Jacques Saadé inform Johnny Saadé On September 2000 about the results expected in a few weeks, that turned out to be better than expected?
That would be very surprising as the price of the transaction would have clearly been better for Johnny Saadé. In that case, Jacques Saadé would therefore have failed to adhere to the bare minimum of business morality and family morality. He also didn’t respect thee duty of loyalty that is expected of any co-contractor who has privileged information concerning the contract. This lack of loyalty would represent an intolerable denial of Johnny Saadé's basic rights."
To conclude these selected quotations from the report, we reproduce the same conclusion of the Expert who ends his report by stating as clearly as possible, with all reservations proper to a professional of his competencies:
"..The damage that Johnny Saadé may have sustained is calculated in billions of euros if the original quasi-parity between the two brothers was re-established and probably in hundreds of millions of euros in capital distribution that still existed in September 2000, in accordance with the infamous and regrettable (due to the circumstances mentioned above) agreement of 16 September, 2000."
Here, in a few passages taken from the report consisting of four volumes, is the indisputable proof of the swindling committed against Mistral (Johnny R. Saadé's group), and of the fraud perpetrated to the detriment of the Lebanese and French tax authorities. It is in this context that the resurgence of the conflict should be considered. Facts cannot be distorted by the disinformation campaign orchestrated by the actual perpetrator of these violations. The Courts will have the final word.
The auditors' responsibility
The auditors did not, at any time, express reservations concerning the balance sheets, the company's financial position, the forecasted results, the parity of the merger, or the improper use of company assets committed by Jacques Saadé in the course of the acquisition of Mistral’s shares.
The declarations made by the Chairman of the Supervisory Committee and the Chairman of the Board depended on the opportunities and positions they shared, as revealed by the analysis of the accounts and statements, and with the active complicity of the auditors.
It is useful to recall that Philippe Willemin, CMA-CGM's chief statutory auditor, had been indicted during the investigation conducted by the Public Prosecutor of Nanterre.
This fact did not intimidate Mr. Willemin nor did it prevent him from committing offenses again, not only by manipulating CMA-CGM's accounts, but also by committing other offences in another compay in Marseille. We understand that he has been investigated recently for the aforementioned offence.
Mistral took every step to avail itself of its rights in relation to these Auditors, without whom the contribution to the illegal acts would not have been possible.
Tags: court, cma, cgm, jacques, saade, shipping, maritime, offshore, affair, conflict, privatization, lawsuit
