Police Detain France Télécom Chief in Tapie Case

France Télécom SA Chief Executive Stéphane Richard was detained by police Monday morning for questioning as part of an investigation into the possible misuse of public funds while he was an official at the French Finance Ministry.

A spokeswoman for the Paris prosecutor’s office said Mr. Richard could be held for as much as 48 hours while he is being questioned, as investigators decide whether to put him under formal investigation or release him.

A spokesman for France Télécom said Mr. Richard’s detention “is a normal measure in this type of investigation.” He said Mr. Richard’s duties would be handled by France Télécom’s deputy CEO and chief financial officer while he is being questioned. A lawyer for Mr. Richard, Jean-Etienne Giamarchi, didn’t immediately respond to a request for comment.

The detention of Mr. Richard is the latest twist in what is often called l’Affaire Tapie, a two-decade tale pitting French tycoon Bernard Tapie against the French state. French investigating magistrates are looking into whether FrenchFinance Ministry officials committed a criminal offense when they decided in 2007 to refer a dispute with Mr. Tapie to an arbitration panel that eventually granted the French businessman €420 million ($555 million).

Socialist lawmakers, who were in opposition at the time, alleged that the decision smoothed the way for Mr. Tapie to reap bigger damages from the French Treasury than he would otherwise have received in the courts as a form of thanks for his support of Nicolas Sarkozy, a conservative, in his successful 2007 presidential election.

At the time, Mr. Richard was chief of staff of then-Finance Minister Christine Lagarde. Ms. Lagarde, who is now head of the International Monetary Fund, was questioned for two days last month by magistrates about her decision to refer the case to arbitration. She was named a material witness in the case and wasn’t charged.

Investigators are probing what role Mr. Richard had, if any, in setting up the arbitration panel, according to a person close to the inquiry. They have already informally questioned Mr. Richard, and police searched his home in January.

Mr. Richard said at the time that the search of his home was “absolutely normal in this type of case.” He also defended his actions and those of other government officials in the 2007 matter, saying they had been “trying in good faith to defend the state’s best interests.”

Investigators have also questioned others who are potentially involved in the case, including the head of the government entity that ended up paying Mr. Tapie, as well as an arbitrator on the panel, who is alleged to have had connections to Mr. Tapie. Last month, investigators placed the arbitrator—Pierre Estoup—under formal investigation for conspiracy to commit fraud, but have yet to open formal probes into anyone else who might be part of the alleged conspiracy.

A lawyer for Mr. Estoup, Edgard Vincensini, said in an email that his client “obviously contests the accusations against him at this stage” and is “confident that justice will reaffirm the truth.”

Wall Street Journal