If this story were presented as a screenplay, no producer would buy it. It’s just too incredible. A flamboyant artist charms his way into the good graces of an 88-year-old heiress, who gives him gifts worth more than $1 billion. The heiress’s daughter sues the dandy for allegedly exploiting her mother’s feeble condition. Meanwhile, the old lady’s butler secretly records her conversations with her financial advisers. Leaked to the press, the recordings suggest massive tax fraud, murky ownership of a tropical island, and cozy, perhaps illegal relations with the country’s president, whose campaign was partially funded by the heiress. Then a key witness for the daughter accuses a prominent Cabinet minister of accepting $195,000 in cash on behalf of the president. But the witness’s reliability is questioned when it turns out that the daughter paid her $515,000. Added to all that, the colossal fortune in question comes from a cosmetics firm founded by an anti-Semitic Nazi sympathizer, whose granddaughter, the plaintiff, is married to the grandson of a rabbi who died at Auschwitz. Would anyone buy that?
Nicolas Sarkozy, the president of France, has no choice in the matter, for the story is all too real. This past summer, in fact, it caused his entire government to tremble.
Like Richard Nixon at the time Watergate began, in 1972, Sarkozy didn’t see it coming. He was concentrating on something else. Moving into the final stretch of a troubled term, Sarkozy was betting everything on a project that had confounded all his predecessors: reform of a generous state-pension system that was headed for bankruptcy. This was a dangerous undertaking in the land of the five-week paid vacation and the 35-hour workweek. Sarkozy was telling the French that they must work harder and longer, and he was upping the basic retirement age from 60 to 62, and from 65 to 67 for a full pension.
History has shown that nothing is more perilous to French governments than an attempt to scale back entitlements. The last time anyone had seriously tried to tamper with the pension system, in 1995, the country was paralyzed by three weeks of strikes, and President Jacques Chirac had to withdraw his proposal for reform. This time, Sarkozy knew the risks were great, but he had two things going for him: an international economic crisis that justified drastic action, and an exemplary labor minister, Eric Woerth.
With his balding dome and perpetual five-o’clock shadow, Woerth was a favorite of the political cartoonists. His shapeless gray suits and somber mien had earned him the nickname Croquemort—the undertaker—among his fellow ministers. Yet he was a highly competent, cool-tempered bureaucrat who spoke with the voice of reason and could, Sarkozy hoped, negotiate with the unions and pass the controversial reform without igniting a social firestorm. However, there was a time bomb ticking under Sarkozy’s point man: his wife, Florence, who had been quietly investing millions for France’s wealthiest woman, Liliane Bettencourt, 88, heiress to the L’Oréal cosmetics fortune.
In retrospect, it was clearly not a good idea for the man who had been budget minister from May 2007 to March 2010—in effect France’s chief tax collector—to have a wife who helped manage the fortune of the country’s biggest individual taxpayer. Furthermore, the minister also served as treasurer and chief fund-raiser for Sarkozy’s conservative Union for a Popular Movement (U.M.P.) party. The situation had conflict of interest written all over it.

What the Butler Heard

The time bomb had actually been ticking since December 2007, when Bettencourt’s daughter, Françoise Bettencourt Meyers, now 57, filed a lawsuit in the Paris suburb of Nanterre. Concerned that her widowed mother was being exploited by her longtime friend and confidant François-Marie Banier, she accused the immensely gifted author-artist-photographer (whose work has appeared in Vanity Fair, most recently in the July 2009 cover story on Johnny Depp) of abus de faiblesse, or exploiting the weakness, of the aged heiress to reap gifts, checks, artworks, and life-insurance policies worth more than $1.3 billion. Bettencourt Meyers also sought to have her mother put under a court-ordered guardianship. The suit ground its way through various stages of judicial wrangling until a court date was finally set for July 1 of this year.
Then the bomb exploded, on June 16, when the investigative Web site Mediapart published excerpts from recorded conversations of Liliane Bettencourt with her chief financial adviser, Patrice de Maistre, and other consultants. The recordings, made secretly by Bettencourt’s butler, contained a number of stunning revelations: more than $100 million in two undeclared Swiss bank accounts; Mme. Bettencourt’s apparent ownership, also undeclared to French tax authorities, of an island in the Seychelles; allusions to various tax-evasion strategies; and, most explosive of all, privileged links with the Woerths and Sarkozy’s government.
Among other things on the recordings, de Maistre is heard telling Mme. Bettencourt that he is planning to move her Swiss money to “Hong Kong, Singapore, or Uruguay … so you’ll be at ease”—presumably meaning that she would not have to worry about French taxmen discovering her undeclared funds in Switzerland, which had recently negotiated agreements with France, the U.S., and Britain to share information about account holders from those countries. He also tells her that when he hired Florence Woerth as an investment manager “her husband was minister of finance, and he asked me to do it.… I did it to make him happy.” On another occasion, he describes Eric Woerth as “very sympathetic, and what’s more, he’s the one who oversees your taxes. … He’s a friend.” In another passage, de Maistre tells Bettencourt that he is in touch with Sarkozy’s judicial adviser, who assures him that “the President continues to follow [Bettencourt Meyers’s suit] very closely.… We know the prosecutor very, very well.” Though it proved no actual wrongdoing, de Maistre’s claim that the budget minister took a friendly interest in the country’s biggest taxpayer, and his suggestion that the government could influence the prosecutor in a family legal wrangle, was highly embarrassing and potentially compromising for both Sarkozy and Woerth.
The press and the opposition Socialist Party jumped on the revelations to demand a full accounting of Woerth’s relationship to Bettencourt. Amid increasingly shrill denunciations of Woerth’s double conflict of interest—a wife working for a suspected tax evader and his own role as his party’s treasurer—the Cabinet minister indignantly waved off calls for his resignation while Sarkozy said he supported his colleague “totally and completely.”
But something had to give. Like Nixon firing aides while the Watergate flames mounted toward the Oval Office, Sarkozy axed two junior ministers accused of profligate spending. Meanwhile, Woerth announced that his wife, Florence, was resigning from the financial firm Clymène, the investment arm of Bettencourt’s Téthys holding company.
The problem continued to grow, however. On June 30, the satirical weekly Le Canard Enchaîné reported that Liliane Bettencourt had received a $38 million tax rebate from the French Treasury in March 2008. The news of the refund, though legal, was a major embarrassment for the Sarkozy government, since it underscored, at a time of widespread economic hardship, the cozy relationship between the power elites and the moneyed class. “The big picture behind this story,” Edwy Plenel, director of the influential Mediapart, tells me, “is the mixture of politics and money—the collusion between the summit of political power and one of the great fortunes of France. The notion of conflict of interest exists only in name here—it hasn’t passed into fact.”

The Accountant’s Account

Sarkozy’s fascination with wealth was underscored on the night of his election, May 6, 2007, when he celebrated his victory with a private dinner at the glitzy Fouquet’s restaurant in the company of rich friends and stars, including the venerable rocker Johnny Hallyday. This high-profile partying just when he had taken over the helm of the Fifth Republic played badly in public opinion and set the tone for his presidency. Sarkozy’s penchant for Rolex watches and Italian designer suits—not to mention his stormy divorce and subsequent marriage to wealthy singer-model Carla Bruni—sealed his image as the “bling-bling” president.
Therefore, what was soon being referred to by the Socialist opposition as the Bettencourt-Woerth affair seemed almost a natural consequence of this unholy alliance between power and money. What’s more, the butler’s secret recordings suggested for the first time that the alliance might have a criminal aspect to it. Those vague suspicions became explicit with the emergence of Claire Thibout as a star witness.
Thibout, 53, had worked since 1995 as an accountant for Mme. Bettencourt and her late husband, André Bettencourt, who died in November 2007. She was part of an upstairs-downstairs conflict that had been simmering in the family’s mansion in the Paris suburb of Neuilly-sur-Seine even before the Bettencourts’ daughter, Françoise Bettencourt Meyers, first launched her suit. Several members of the household staff, including Thibout, had become troubled by what they considered Banier’s predatory behavior and expressed their concerns to Bettencourt Meyers, later repeating them to police investigators. As a result, they had been considered untrustworthy by Mme. Bettencourt and fired from their jobs.
As the Bettencourt-Woerth scandal was heating up, the ex-accountant granted an incendiary interview to Mediapart, which was posted on July 7. Among other things, she claimed that Woerth had been given $195,000 in cash by Patrice de Maistre to help fund Sarkozy’s 2007 presidential campaign. Thibout was also quoted as saying that Sarkozy himself, while serving as mayor of Neuilly from 1983 to 2002, had been a regular at the Bettencourt villa and had “received his envelope” as well.
Thibout’s claims were potentially devastating to Sarkozy’s government: if proven, they would expose the president and his most valued minister to charges of influence peddling and receiving illegal campaign funds. (Political donations in France may not exceed $9,700.) The media promptly started speculating about a “French Watergate,” and the similarities between the two scandals were striking. In both cases, an aggressive investigative press linked the presidency to suspected crimes, officials were jettisoned, and the credibility of key witnesses was attacked in order to protect the embattled president.