One of the largest fraud trials ever heard in France has begun. It involves 124 people who allegedly defrauded banks during the 1990s of more than FFr540 million (US$75 million) in a series of pyramid schemes.

The trial, which may conclude during April, has been dubbed 'l'Affaire du Sentier', after the Parisian district with which most of the accused are in some way connected. Sentier is a rabbit warren of small streets, home to some 3,000 French clothing companies, and a renowned harbour for petty criminals.

The individuals on trial face various charges related to a number of different scams. Some are accused of smaller offences, including concealment and minor money laundering. Other charges contemplate forgery, fraudulent bankruptcy, handling stolen goods, the use of forged documents and involvement in wide scale money laundering schemes. Around 700 small shops and businesses are implicated in the frauds.

L/Cs at the heart of investigations

It appears that a very significant number of the scams may be rooted in the Sentier merchants' ability to secure bank loans on the basis of letters of credit (L/Cs) obtained for purportedly genuine contracts that turned out to be fictitious.

Prosecutors claim that the elaborate pyramid schemes were based on money obtained using fraudulent L/Cs on which a number of banks paid out. The frauds came to light when several banks - including BNP, Crédit Agricole, Crédit Lyonnais, and Société Générale Crédit - complained to police that money lent on the security of discounted L/Cs had vanished into dummy companies.

It is alleged that merchants created the dummy companies, ordered merchandise that was never paid for and then declared bankruptcy. Proceeds from the alleged frauds were then money laundered to Belgium, Austria, Israel and Morocco.

International web of intrigue

An offshoot of the investigation revealed an alleged money laundering chain to Morocco that was in turn linked to illicit arms sales to Angola. It was in the course of investigating this chain that Jean-Christophe Mitterrand, son of the late French President, François Mitterrand, was arrested and briefly jailed late last year.

The scale and complexity of the alleged frauds is matched by the speed with which they were perpetrated. Most of the transactions took place between 1996-97. While the frauds centred on the Sentier district, the schemes involved individuals and businesses elsewhere in France.

Not all of those indicted are appearing in court and are being tried in their absence. Thirteen of the accused have absconded, including one of the alleged ringleaders, Chaim Weizman. Prosecutors have accused the state of Israel of sheltering some of the accused.

The trial, which began in February, has been delayed several times for procedural reasons. The complexity of the case has spawned a new breed of CD-ROM based legal software to handle the volume of documents involved. The trial is being conducted in a special courtroom built to accommodate up to 500 defendants, lawyers and other parties to the case.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.