A range of offshore companies, often with names homonymous with CMA, were set up in various countries
The main aim of these companies belonging to Jacques Saadé was to act as a front for the funds and assets embezzled from CMA-CGM.
Few actually conducted any kind of business; some were engaged in maritime and related sectors.
Vessels, containers and other assets were owned by these companies belonging to Jacques Saadé, which officially appeared as service providers for CMA-CGM, such as owners of ships leased to CMA-CGM.
Yet, these vessels were actually paid for by CMA and the rent paid by the latter to the offshore companies was used to reimburse the price and thus ownership fell to this front company totally owned in its entirety by Jacques Saadé. The purchase contracts were concluded in the name of the offshore company and guaranteed by a long-term lease with CMA, a matter which had been clearly demonstrated.
Jacques Saadé offered CMA the exercise of the purchase option, the price of which was set by him. He was the secret seller and the decision-maker for the purchaser, hence the considerable and unchallenged capital gains. For example: the two vessels, Ville de Titana and Ville de Tucana, are considered by legal expert to be overvalued by several millions 8.
When Jacques Saadé was forced to comply with the French Government’s required equity funds at the time of the privatization of CGM, he declared that these two vessels were the property of CMA, paid for by a contractual loan, i.e. for an unspecified payback period.
The question arises as to what ship-owner would be prepared to abandon debts of this importance, unless this was done in relation to companies with the same manager.
This set-up obviously involved other assets of the group, including vessels, containers, real estate and service provider companies.
These financial flows, which fed the offshore companies of Jacques Saadé, are clearly illustrated below.
OFFSHORE TRANSFERSJudicial search investigations (“commissions rogatoires”) launched by the Public Prosecutor's Office in Nanterre, along with the judicial interrogation of Jacques Saadé as a result of the latter’s indictment, as well as the inquiries made at the same time by Mistral, revealed embezzlement of funds which were organized using a well-run system set in place by the main beneficiary, Jacques Saadé.
This system was based on double invoicing: Firstly, via the various suppliers of CMA-CGM (refueling companies, lease holders of containers, shipyards, insurance companies, etc.) and secondly, via the network of hundreds of harbor agents worldwide.
Suppliers, such as fuel companies, used to invoice CMA at prices officially agreed with Jacques Saadé's right-hand men. The difference was diverted, in absolute discretion, by way of a transfer to a foreign company whose name, homonymous with CMA, would suggest a satellite company of the Group, whereas it was an extraneous body to CMA, except for the fact that it fully belongs to Jacques Saadé, the Group's acting chairman 9. This is demonstrated by bank statements showing transfers received from TEXACO France and paid to CMA International’s accounts, and from a port-handling company in Rotterdam which similarly reassigned commissions to the aforementioned accounts. Naturally, the real amount of the invoices was fully paid by CMA-CGM to those service providers. From such secret accounts, bank transfers were even made under the instructions of Jacques Saadé to accounts of another of his personal companies, SAGA Holding s.a.l.
In order to deceive these providers of goods and services, company names homonymous with CMA were given in order to receive these funds in bank accounts based outside of France. For example: in Switzerland, UNITED OVERSEAS BANK, account 34481-D 10.
For example, an account was opened by Farid Salem, General Manager of CMA, as a front man for Jacques Saadé. This account, amongst others, served to forward embezzled funds.
The consignment agents for CMA vessels in the various ports, at the time of their appointment, had to enter into agreements to over-invoice their services. The difference was also reassigned to foreign accounts held by Jacques Saadé. Striking evidence is furnished in the bank transaction statements. Once received, the funds were immediately diverted to other banks in other countries and, for a better cover, redirected to numbered accounts, including Switzerland.
To be comprehensive, it should be noted that despite Jacques Saade’s own confession, the prosecuting judge, with respect to the above, was granted a court dismissal!11
VESSELS THE EMBEZZLED CMA VESSELS, ASSETS, AND EQUITY CAPITALTHE "VILLE DE TUCANA" - THE "VILLE DE TITANA"
Following the criminal lawsuit filed by Johnny Saadé, the police officers from the Financial Investigation Department, upon judicial instructions and investigating along the same lines as the Gaudino firm, made an interesting discovery:
The two vessels, the Ville de TITANA and the Ville de TUCANA, were purchased from companies of which three CMA executives were shareholders.
Was this a fictitious purchase aimed at inflating the balance sheet?
The police officers were even more puzzled as they had seized a memo explaining that, in less than a year, the two vessels were to be scrapped for just 48 million French Francs. How was it possible to explain a loss of 20 million French Francs over such a short period of time?
As a result of Johnny Saadé filing a criminal lawsuit in the Court in Nanterre (Hauts-de-Seine), the Financial Investigation Department of Paris took over.
A PRIVATIZATION THAT REVEALS A LEAKAGE OF ASSETS.
JACQUES SAADÉ UNMASKED BY HIS "MUDDLE".
There was an imperative that could not be ignored. The terms and conditions imposed upon applicants at the purchase of CGM (a public company) to justify equity capital not less than 200,000,000 French Francs, the fly in the ointment that threw Jacques Saadé into panic.
He brought together his senior management and statutory auditors to have a round table discussion amongst the master's close circle.
"We have a problem," he told them, "and you must find a way to comply with the minimum equity capital obligation."
His aide-de-camp, the most experienced for such situations, and being perfectly aware of the official equity capital and concealed equity capital, declared: "We have to scrape together what we can, even if it means giving up part of our spoils."
To do this, they needed to resort to the ingenuity of the statutory auditor, none other than Mr. Willemin.
Thus, through accounting tricks, ad hoc contracts, and board meetings, as well as approval at a moment's notice ownership of the two vessels, the Ville de TUCANA and the Ville de TITANA were transferred from unknown ghost owners to CMA.
Incredible but true: the alleged selling ship owners agreed to convert the rent paid up until then by CMA into credit to be deducted from the price of these vessels.
What is more amazing, these same sellers agreed to transform the balance into a Subordinated Loan which is a transaction without precedent in the annals of maritime business. But, the investigation conducted by the Public Prosecutor's Office in Nanterre (France) brought to light overwhelming evidence of the embezzlement of CMA's equity capital.
CMA, via an affiliated company, Compagnie Maritime de Gestion, had paid rent to alleged foreign companies. This rent represented tens of millions of dollars, an amount greater than the actual value of these vessels. Consulting the comparative tables below, which were inadvertently produced by Mr. Moatti, Jacques Saadé's lawyer, we get an undeniable picture of the system set in place governing the transactions to purchase vessels on behalf of front companies, and the price which was paid by CMA funds in the form of rental payments which are far above the initial purchase price12.
For example:
The Ville de TITANA was leased by CMG Titana S.A.R.L., a wholly-owned subsidiary of CMA, from Albany Marine INC (Liberia), an offshore company controlled by Jacques Saadé, and paid for over a period extending from 1991 to 1996 at the price of approximately 19,700,000.00 USD.
Same plan for the Ville de TUCANA, which was purchased under the same conditions by CMG TUCANA S.A.R.L., a subsidiary of CMA, from TUCANA Company LTD (British Virgin Islands), another of Jacques Saadé's offshore companies, for the sum of 17,600,000.00 USD. These are, naturally, but two tangible examples amongst many other ones 13.
Thus, taking the case of these two vessels only, it proves that CMA was having its assets drained whilst its financial burden was being increased by more than 35,000,000.00 USD for the benefit of front companies belonging to Jacques Saadé.
These two vessels had thus been purchased indirectly using CMA funds and paid for in excess of their price; the monetary value estimated by an expert was 7,500,000.00 USD per unit, i.e. 15,000,000.00 USD for both, but ownership was attributed to a front company owned by Jacques Saadé. The opportunity for such a scandalous and illegal transaction, was thus available.
There were in fact two such "return trips": the vessels had already been sold on 24 November, 1990 to CMA. Again in December 1996, two front companies sold these same vessels again to CMA. (The directors of these companies were none other than the directors of CMA).
During discussions at the General Meeting of CMA, which was held to approve these transactions, MISTRAL's representative, despite his firm insistance, was unable to get a clear response from Jacques Saadé regarding the ownership of these vessels. The minutes of this meeting clearly show the futile debate that took place and further identify the accomplices to this fraudulent set-up.
The same procedure was maintained under all circumstances. A director of CMA communicated with his colleague regarding the sale of this same company and who at that time was also the director of one of the front companies selling the vessels. However, it is surprising to note that the signatories of these letters were anonymous.
But the fraud was far from confined to these operations, namely:
The Public Prosecutor's Office in Nanterre investigating the case appointed experts to verify the authenticity of the operation.
These experts certified that the declared price of these two vessels was greatly overvalued. They cited tens of millions of French Francs.
Who profited from the crime? Who was going to run off with the spoils?
Two birds killed with one stone (two offences committed with one skilful maneuver); thus Jacques Saadé first unduly inflated the equity capital in order to meet the privatization obligations and, second, increased CMA's debt to the benefit of his personal offshore companies.
THE "VILLE D'ANTARES"
Another example also revealing this system which allowed Jacques Saadé to organize the leakage of funds, is well and truly that of the Ville d'Antares.
This vessel was purchased in principle by CMA on the basis of joint-maritime ownership with another company under Jacques Saadé’s control, Mariner Shipholding LTD, a company established under Liberian law and financed largely by UNICREDIT (Union de Crédit pour le Développement Régional). After analyzing the terms of the loan agreement drawn-up between the finance company and Mariner Shipholding LTD, the contractor of the vessel, we see that the latter would benefit from credit guaranteed on the one hand by CMA, and, on the other, by the pledge of shares to the “holder”. But already the question was: why were these shares pledged to the holder and not simply registered shares?
At the end of construction, Mariner Shipholding LTD was to assign ownership of this vessel to a maritime joint-ownership and the price of this assignment was to be used to release the borrower from all its obligations vis-à-vis the lender. However, there were crucial questions: what was the actual total amount for this transaction? In other words, was this joint-ownership arrangement really going to pay any sum of money to Mariner Shipholding LTD and what would this amount be? Would it be a real or overestimated sum? What concealments would CMA be subjected to? A whole string of questions… but it all remained very vague.
In tangible terms and more explicitly, CMA purchased a vessel, the financing of which it guaranteed on behalf of a third party, which was none other than one of the offshore companies of Jacques Saadé. Once it was delivered this vessel, the contractor assigned ownership to a joint maritime ownership , which featured other companies from the same Jacques Saadé cartel. This financing guarantee was made at the price of Mariner Shipholding’s shareholders. These shares were placed under custody for the proper execution of the loan agreement. But to whom would these shares fall once the borrower had complied with all its obligations? Everything suggested that Jacques Saadé was still practicing other forms of erosion, thus depriving CMA of resources that should have fallen directly to it if the transaction had been concluded with it and without passing via a third intermediary company. Nonetheless, the lack of clarity of this transaction lays in the fact that Mariner Shipholding LTD was to dispose of this vessel during a certain period, with the possibility of leasing it to another ship owner and discounting the increases in value from which CMA would not profit. So what detriment did CMA suffer in the end?
Another question arises: how could such complex set-ups be allowed without the various parties protesting? The answer is as evident as the signature affixed to the loan agreement signed between Mariner Shipholding LTD and the lender, none other than that of Raja Sarkis, the Finance Director of CMA. Who profited from the offence?
THE "VILLE DE DAMIETTE"
This is another example of the embezzlement of the Group's assets.
During the proceedings initiated against Jacques Saadé, this vessel was in the port of Beirut, and its seizure was ordered by the executive office of the Court of First Instance (Tribunal de Grande Instance) of Beirut, Lebanon.
In order to have this vessel released, the opponent's solicitors furnished documents in order to prove that this vessel was not the property of CMA.
In fact, the ship was registered in the name of a company incorporated in the British Virgin Islands, in the name of Damietta Holding Ltd. The latter’s management had been entrusted to another company, the Danish SIF Peter Ltd., and the vessel was "officially" chartered by CMA.
We had sufficient doubts that this was merely a cover-up.
An investigation was immediately launched in all the countries where this vessel had ports of registry.
We discovered that Damietta Holding Ltd. was only a screen and that the Danish management company, SIF Peter Ltd., received its instructions from Jacques Saadé. The price of the vessel, payment of which was distributed over several years, and the funds to pay it, were received in the form of rental payments from CMA.
Within the framework of the loan settlement, a memo was sent on 5 November, 1997 by CGM to Alain Wils, General Manager of CMA at the time, clearly stipulating that Damietta Holding Ltd is not consolidated and that it is controlled by CMA.
In this same letter, CGM set out two scenarios for the possible takeover of the "Ville de Damiette", but these were to be dropped as a result of the ongoing investigation, and came-up against the estimated value of the vessel which, according to Herve Stalla-Bourdillon, had a consolidated value in CMA's accounts as of 31 December, 1996, of 5 million dollars.
Upon reading this memo, we retain the following points:
• The "Ville de Damiette" was leased for 5 years; the total of accumulated rental payment was $6,156,000, comfortably exceeding the monetary value of the vessel according to the brokers' estimate (4.2 million U.S. Dollars).
• Once the vessel is to be ceded, the transaction would generate a net profit for Damietta Holding Ltd, upon who depended the exercise of the call option.
In conclusion, this vessel purchased by Jacques Saadé, was concealed behind a front company and completely financed by CMA, which could claim ownership only when Jacques Saadé would decide the amount of the capital gain he would have CMA over-pay to supposedly exercise the call option.
It is even more striking to note that the proxy of CMG Damiette s.a.r.l. was none other than Kevork HEKIMIAN, a manager of CMA.
In an even greater concealment, two companies were involved in this set-up, both managed by CMA employees, Herve Stalla Bourdillon for Damietta Holding LTD and Kevork Hekimian for CMG Damiette s.a.r.l.
The vessel having been seized in Beirut, Jacques Saadé, in order to release himself from the financial obligations incumbent upon him, put in place a new set-up with the help of these two sidekicks and his head of management, Farid Salem.
A protocol was quickly signed by way of which CMA's commitments and expenses were shouldered by CGM. All of this, making sure that Jacques Saadé’s personal interests were duly protected, most importantly in relation to the said call-option.
These facts were recorded in a report by the Financial Investigation Department (Judicial Police), stating that in a written document signed by Stalla Bourdillon and sent to Jacques Saadé, in which the former clearly explained the set-up which would generate a profit of $2,544,895 to the benefit of Jacques Saadé and to the detriment of CGM, of which he ironically was himself acting chairman. This is a clear case of misappropriation of company assets.
This is incontrovertible evidence of clumsy set-ups. Perfect crimes are few and remain unknown. This is not the case here.
