Quotes of the Day

Yes, conceded the defendant — a man named Yves Verwaerde — he had opened a $2 million Swiss bank account with the code name "Salad" in July 1991, when he was a Member of the European Parliament. It was his other employer at the time, the French oil company Elf, that asked him to open the account, he explained. The salad full of greenbacks was earmarked for Jonas Savimbi, the rebel leader in Angola, where Elf was negotiating important contracts.

Listening intently in the wood-paneled courtroom of the Paris Tribunal last week, Judge Michel Desplan had some questions. If this $2 million was for Savimbi, how come Verwaerde had allegedly used about $300,000 of it to build a villa for himself on Ibiza? And why did his wife have power of attorney over the account? Verwaerde didn't miss a beat. He claimed that Savimbi himself had said he could dip into the money. As for his wife, "she was usually the one who picked up the telephone when it rang, so she spoke to Savimbi several times when he called my home," he replied.

Revelations such as these have become daily fare at a trial that has opened a window onto the biggest scandal of the Fifth Republic. Verwaerde is one of 37 defendants in the case; others include the former chief executive of Elf, several top company officials and a cast of other luminaries including a senior spy (although no one who is still politically active). They are charged with embezzling about $435 million from Elf during the late 1980s and early '90s. While proceedings are only half done, they have become politically explosive because witnesses are providing detail upon detail about seamy but officially sanctioned practices that, taken together, suggest something was very rotten at the heart of French state capitalism.

Elf at the time was state-owned, and the most damning evidence to date has come from its erstwhile CEO, Loik Le Floch-Prigent, and two top corporate lieutenants, Alfred Sirven and André Tarallo, the latter dubbed Mr. Africa. They have meticulously described how Elf kept a slush fund, overseen by Sirven, allegedly used to pay bribes via Swiss accounts to African leaders including Savimbi and Gabon President Omar Bongo, as well as to channel money to the two main French political parties.

Pressed by Desplan, 47, the pugnacious presiding judge, Le Floch-Prigent described how Elf's payoffs in France first tilted toward the Gaullist party of Jacques Chirac until then-President François Mitterrand, a Socialist, personally summoned him to ask for "more balanced" treatment. Le Floch-Prigent and Sirven haven't named names, and Chirac himself has not been implicated in the case, but the sums are substantial. Le Floch-Prigent estimated Elf handed out about $5 million per year to the political parties, but Sirven quickly claimed that the amount was "very, very, very, very much higher."

Why would Elf make potentially illicit payments to French politicians? Le Floch-Prigent's rationale had a touch of paranoia to it: "Elf is a French company up against the Anglo-Saxon world," he told the court. "We are David against Goliath. Our politicians had to support us everywhere. In Africa, for example, if we got into a war between Socialists and Gaullists, we wouldn't know where to go. A certain number of French politicians were capable of destabilizing Elf. We had to shut them up or make sure they were with us."

To what extent Elf broke French law with its slush fund is unclear. At the time, party-funding rules were loose and paying bribes to foreign officials was legal; indeed, companies could deduct them from their taxes. (That has since changed.) The prosecutors are focusing on allegations that, in the process of handing out Elf's money, the defendants broke the law in helping themselves to some of it. Le Floch-Prigent, who is now serving a 21/2 year sentence from a previous corruption trial, has conceded that Elf paid for his $5 million divorce settlement and bought him a $9.3 million apartment in the upscale 16th arrondissement of Paris as well as a country house; perks he sheepishly described as "the folly of grandeur." Verwaerde said Savimbi had approved his taking some of the Swiss account money as a "fee." Tarallo testified that the $6.5 million he used to buy and renovate a Paris apartment was spent on President Bongo's behalf, an accusation Bongo denies. Sirven allegedly spent $13 million on art and furnishings for a castle in Chinon.

As well as being a sensation in France, the case has aroused anticorruption experts elsewhere. This week, the court is set to hear testimony about controversial commissions paid to German politicians in connection with Elf's acquisition of the Leuna refinery in eastern Germany in 1992. In a surprising development, Pierre Lethier, a top Secret Service official who allegedly played a central role in the German transactions and who disappeared in 2000, refusing to be deposed by the prosecutors, showed up in court last week saying he was ready to talk.

In some ways, the trial is a punctuation mark on an era of brazen payouts. In the last decade there has been a concerted international effort to clamp down on corporate corruption. The U.S. paved the way in 1977 by making it a crime to bribe a foreign official, and in 1997, 35 nations including France followed suit by agreeing to an O.E.C.D. convention that outlaws such payoffs. But the Elf trial is being prosecuted under the laws against embezzlement that applied when the alleged offenses took place. Among other things, under the new laws it is illegal to make payments to foreign leaders, through Swiss bank accounts or otherwise.

While there are loopholes — payments to foreign political parties, for example, are not included, and some so-called facilitating payments are allowed — experts agree that the days of graft on a grand scale are over. "It can't be the way it was," says Lucinda Low, a leading U.S. anticorruption lawyer. "That kind of open [corruption] has changed."

But what is hidden may simply become harder to find. Jermyn Brooks, executive director of Transparency International, a group that fights corruption, worries that the new laws against bribes just mean that "much subtler methods are used to achieve the same ends," including using agents or subcontractors to make payments under the table. Transparency International and other activists say that, as well as closing the loopholes, far more effort must be put into implementing and monitoring the new anticorruption laws.

Elf itself is no longer the cozy handmaiden of the French state it once was; it has been privatized by the French government and is now part of TotalFinaElf, the result of mergers among France's Total and Elf and Petrofina of Belgium. The firm is trying to keep a low profile while the trial continues, and senior management isn't commenting. Still, it's a sign of the times that the corporation recently put in place audit controls to detect possible corrupt payments and is implementing a code of ethical conduct for its employees. Is that enough to prevent a repeat of the abuses of a decade ago? Maybe not. Amid the diplomatic fallout of the war in Iraq — and with that country's oil industry in play — the French are more than ever up against an Anglo-Saxon world. But now there are stronger deterrents, and greater oversight, to prevent a return to Elf's salad days.

• PETER GUMBEL | Paris
• The Elf trial puts French state capitalism in the dock