Report clears French government minister of interfering in tax affairs of L’Oreal heiress

French labor minister cleared in heiress case

PARIS — A French financial inspection agency said Sunday that a beleaguered government minister did not intervene in the tax affairs of the heiress to the L’Oreal beauty empire, who is at the center of a snowballing scandal that has destabilized the government.

Labor Minister Eric Woerth still faces pointed questions about the multifaceted scandal — which include allegations of illegal party financing and questions about possible tax evasion — and about his links to the 87-year-old heiress, Liliane Bettencourt.

President Nicolas Sarkozy has strongly backed Woerth, who is in charge of the president’s unpopular pension reform program to raise the retirement age from 60 to 62. As a result, the president has faced dismal approval ratings and has strained to keep his government and conservative party from unraveling.

When questions about Bettencourt’s taxes emerged, her financial adviser acknowledged that she kept euro78 million ($97 million) in two foreign accounts and promised to get her affairs in order.

Woerth’s wife worked at a firm that helped manage Bettencourt’s fortune but she quit when the scandal broke. Woerth himself was budget minister until recently, leading a crackdown on tax-dodging. The couple have denied any conflict of interest.

The current budget minister asked an intergovernmental financial inspection agency to investigate whether Woerth abused his position to intervene in Bettencourt’s tax affairs. One question was whether he spared her from audits.

The report Sunday from the General Inspectorat for Finance said he did not intervene in any way. Sarkozy and Woerth’s political party welcomed the report and said the minister had been “unjustly insulted and smeared.”

The left has asked how the inspection agency could be impartial, since it is part of the government.

The affair took a new twist last week, veering into the issue of political party financing. Woerth, in addition to his governmental duties, has long been the treasurer of Sarkozy’s UMP party.

Bettencourt’s former accountant told an online news outlet and French investigators that the heiress’ financial adviser gave euro150,000 in cash to Woerth to contribute to Sarkozy’s 2007 presidential campaign. The alleged sum would greatly exceed the legal limits for campaign financing.

Both Woerth and Sarkozy have strongly denied the allegation, which is unproven, but French prosecutors have opened a preliminary investigation. Woerth was quoted as telling Le Journal du Dimanche newspaper that he was willing to speak with investigators and that he had nothing to hide.