Nicolas Sarkozy Embroiled in Campaign Finance Scandal

He's captivating. He's tough. And he loves a challenge. But all that may not be enough to save President Nicolas Sarkozy of France as he fights for his political life amid a burgeoning campaign finance scandal.

At issue is whether Sarkozy accepted illegal cash donations to his 2007 presidential campaign from Liliane Bettencourt, the French heiress to the L'Oréal fortune and the world's third-richest woman. A former accountant to Ms. Bettencourt has asserted that Sarkozy regularly received cash payments from the heiress and said on one occasion, his campaign was given a cash donation of some 150,000 Euros (approximately $190,000.)

Political donations in France are limited to €4,600 for individuals (approximately $5,790), and cash contributions cannot exceed €150 ($190). All private campaign donations above that amount have to be paid by check, with the donor clearly identified. French prosecutors have opened a preliminary investigation into the allegations of campaign finance improprieties.

Sarkozy has adamantly denied these charges as part of an elaborate smear campaign to tarnish the reputation of his Center Right UMP party on the eve of an unpopular pension reform that will raise the retirement age from 60 to 62. On Monday night, he took to national television to defend himself and his government in what many perceived as a last-ditch effort to save face in a scandal that caught the government off guard.

But the scandal has had legs. For starters, the UMP treasurer who allegedly accepted the cash contribution is a gentleman named Eric Woerth. He has also come under serious attack after it was revealed that his wife worked for Bettencourt while he was budget minister and while the billionaire was allegedly hiding part of her fortune in Swiss bank accounts. (A separate investigation is looking into Bettencourt's alleged tax evasion.) Woerth is now the Labor minister who is leading -- among other things -- pension reform.

Woerth was cleared on Sunday of abetting tax evasion on behalf of Bettencourt, but political opponents question whether that investigation (carried out by the French inspector of finances) was really impartial. Nor did the report clear him on the campaign-contribution charge. The president stood by him as an honest man in Monday night's television appearance, although he did say that he'd advised Woerth to stand down from his role as UMP party treasurer.

Sarkozy's brash and flashy style has always rankled the sensibilities of an electorate used to a more aloof, genteel image of their statesmen. It didn't help that upon assuming office, he promptly turned around and gave himself a 140 percent pay raise. And this "bling bling" reputation bled over into his administration. Just last week, two junior ministers resigned after it was revealed that one spent 12,000 Euros ($15,000) of taxpayers' money on cigars while another spent 116,500 Euros (close to $150,000) to fly a private jet to Martinique. Not exactly conducive to building a "republic beyond reproach," as Sarkozy once promised.

The big question, of course, is how all this is going to play out politically. The president's popularity was already plummeting following a humiliating defeat for his party in regional elections in March. Now it is at an all-time low. On Sunday, his party lost a safe parliamentary seat in what the opposition Socialist party is painting as a rebuke against the current climate of scandal and corruption.

If British politics is to be any guide to how this all plays out, things don't look promising for the French president and his party. Last summer, the United Kingdom was stunned by a far-reaching expenses scandal which revealed that Members of Parliament (MPs) from all three major parties were systematically abusing perks such as second-home allowances on the taxpayers' dime. The scandal provoked widespread revulsion with the political class. Many saw the hung parliament result delivered in the May elections as the direct byproduct of voter disenchantment with a corrupt political class.

Sarkozy is up for re-election in 2012. Boy, does he have his work cut out for him.


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