France's Chirac denies Japan bank account allegations

PARIS - French President Jacques Chirac on Tuesday denied he had a secret bank account in Japan that a newspaper said had come to light during an investigation into a plot to smear presidential hopeful Nicolas Sarkozy.

Le Canard Enchaine, a satirical weekly, reported that a top intelligence official told judges probing the plot targeting interior minister Sarkozy and other leading politicians that Chirac opened a bank account in Japan in 1992 containing 300 million francs (about $93 million).

"The president categorically denies the information reported by the Canard Enchaine," a source close to Chirac said.

"These allegations are linked to a campaign of lies that began against the president in 2001 without any foundation."

The paper said money had been paid into an account at Tokyo Sowa Bank over years by a "mysterious 'cultural foundation"'.

The "Clearstream affair" - swiftly dubbed the "French Watergate" by the opposition - has embroiled several members of Chirac's conservative Union for a Popular Movement (UMP) party, threatens to hurt the right ahead of the 2007 presidential election, and has paralysed government business.

The affair began with anonymous charges in 2004 that Sarkozy and other politicians held accounts in a Luxembourg-based finance house linked to kick-backs in the bribe-ridden sale of French frigates to Taiwan in 1991.

The list of accounts quickly proved bogus but the probe went on, leading to complaints by Sarkozy, who heads the UMP party, that it was an elaborate attempt to discredit top politicians.

Sarkozy spent two hours with the investigating magistrates Jean-Marie d'Huy and Henri Pons at the central Paris offices of the financial crimes unit on Tuesday.

"I was received by the magistrates as a victim," Sarkozy told reporters afterwards.

"I told them I wanted the truth and that I had confidence in them."

The affair began as he was preparing a bid to take control of the ruling UMP party from allies of Chirac, a long-time political rival of the interior minister.

The scandal could have sunk Sarkozy's bid to gain control of the UMP, which is widely seen as a crucial vehicle for mounting a credible presidential bid in 2007.

The smear campaign has ensnared Prime Minister Dominique de Villepin, who played a key role as foreign and then interior minister in 2004 in ordering a secret probe into the scandal.

Villepin has vehemently denied any improper conduct. But he has failed to dispel suspicions that he prolonged the probes even after it became clear the Clearstream lists were fake.

Chirac has to date ignored opposition demands he sack his prime minister but a close Sarkozy ally said the mounting suspicion was making Villepin's position untenable.

"Either the prime minister is able to provide irrefutable proof that this affair was a set up that had nothing to do with him, or the president will have to draw the consequences and change prime minister," said Francois Fillon.

"I don't think we can carry on in this situation for long," he said on France Inter radio.

In a fresh twist in the complex saga, the Le Monde daily reported on Tuesday that parts of the case file had gone missing. There was no immediate confirmation of the report.

Villepin has failed to recover from last month's humiliating defeat over a youth jobs contract. Even if he stays in office, his chances of contesting the presidency now appear very slim.

Sarkozy, who became UMP leader in November 2004, is being widely touted as a possible replacement.

The interior minister could provoke an all-out government crisis if he implicated Villepin in the affair, although Sarkozy told reporters he had not incriminated anyone during his talk with investigators.

- REUTERS