French central bank chief Jean-Claude Trichet went on trial today in connection with misleading accounting at formerly state-owned Credit Lyonnais in a case that could prevent him becoming the next president of the European Central Bank.
The trial, due to last for about six weeks, will be closely watched in the world of global finance, as its outcome could disrupt a compromise reached to ensure a smooth transition at the ECB.
Trichet is accused of having overlooked false accounting reports concerning the formerly state-owned Credit Lyonnais in the early 1990s as it plunged towards near-collapse. He faces trial with eight others, including former Bank of France governor Jacques de Larosiere - a heavyweight in financial circles, who served as both managing director of the International Monetary Fund and president of the European Bank for Reconstruction and Development.
The allegations date from 1991, 1992 and the first half of 1993, when Trichet was treasury director at the French finance ministry and responsible for state-owned enterprises such as Credit Lyonnais.
Trichet was placed under judicial investigation in April 2000 on suspicion of 'spreading false information on the market and presenting and publishing inexact accounts' in the rescue of Credit Lyonnais. But in May 1998, he had been promised the top job at the ECB, according to a verbal agreement among European heads of state and government.
In principle, he is to replace Wim Duisenberg, who has agreed to step down on July 9 - three years ahead of schedule - to make way for a French ECB head. But the accord could unravel if Trichet is convicted.
Trichet, who has never commented publicly on the accusations against him, is suspected of having too readily accepted financial information that tended to minimise the deepening problems at the bank.
Credit Lyonnais had expanded rapidly abroad, becoming the largest bank in Europe only to be brought to the verge of bankruptcy with the end of the property boom in the late 1980s and by misjudged investments. The cost of a state rescue of the bank, which has since been privatised, has been estimated at €7 billion.
The court proceedings will seek to determine if the financial health of Credit Lyonnais had been deliberately underestimated and, if so, by whom. The trial should further determime if any of the defendants agreed to say nothing about the false reports.
Also on trial are former treasury official and Credit Lyonnais board member Jean-Pascal Beauffret, former bank president Jean-Yves Haberer, and former bank managing directors Bernard Thiolon and Francois Gille.
Three auditors, Albert Pavie, Kevin Pilgrem and Patrick Gounelle, are also accused of having certified false information.
