New controversy hits Clearstream

New controversy hits Clearstream

Concerns have emerged over payment acccounts used by some of the world's most powerful financial institutions. They appear to have been left open years despite instructions to close them. Up to five well-known banks are conducting internal investigations into a supposed failure by Clearstream, the interbank payment system based in Luxembourg.

The possible irregularity was uncovered by Jean-Louis Gergorin, a former vice-president of European defence giant EADS, while investigating an earlier alleged £300m fraud at the company - an affair that rocked the French establishment when Gergorin's boss, Jean-Luc Lagardere, died in unusual circumstances in 2003.

Clearstream says investigations uncovered no evidence of any wrongdoing materialised. But Gergorin urges City banks to check any unpublished accounts they had with Clearstream they thought were deactivated.

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Clearstream, a wholly owned subsidiary of Deutsche Borse, ensures delivery of cash and securities between trading parties. Gergorin believes that Clearstream accounts that had been ordered to be closed since May 2001 continued to be active until 2004. But he added that the Clearstream management drafted in from December 2004 was beyond reproach, and had implemented high standards of internal control.

'The key issue is that there are four or five leading banks that are trying to establish whether there had been abnormally long delays in the closing of some of their accounts. Should it be confirmed, their fiduciary duty would be to ask for a full investigation,' he told The Observer.'

Gergorin came to prominence last year when his revelations forced scrutiny of the sale of six navy frigates 16 years ago. French defence group Thomson-CSF sold the frigates to the Taiwanese government for £1.4bn. It is alleged that huge commissions and bribes totalling £300m accounted for the inflated price.

The frigates scandal was linked to the deaths of four people, including Lagardere, and has sparked a political crisis involving Prime Minister Dominique de Villepin and presidential hopeful Nicolas Sarkozy. Gergorin himself is under investigation by a French court in connection with his claims about Clearstream.

Critics say he is out to destroy his defence industry enemies, and to promote the interests of his political allies. He admits he made a mistake hiring an IT expert to look into Clearstream's database who supplied him with what transpired to be false information, which he passed on to French judges.A Clearstream spokesman maintains nothing untoward ever took place. 'We already answered Gergorin's questions repeatedly to French and Luxembourg investigators. If there was anything to be found, it would be found by now.'

Guardian Unlimited © Guardian News and Media Limited 2006