The AMF, France's financial watchdog, yesterday rejected accusations that it changed its own report into accounting irregularities at Rhodia, the chemicals company, to protect Thierry Breton after his appointment as finance minister in February 2005.
The French regulator defended its independence, about which questions were raised this week after it emerged that its initial report into Rhodia was altered and a second version issued four days after Mr Breton's appointment.
Controversial revelations about Mr Breton would have been damaging at the time of his appointment, as he replaced Hervé Gaymard, who quit after a scandal over an apartment he rented at the state's expense.
Gérard Rameix, general secretary of the AMF, told the FT yesterday he and other senior officials at the regulator were sent the final version of the report before Mr Breton was named finance minister and no alterations were made after that.
Mr Rameix, who has authority over AMF investigations, said it was "absurd" to suggest, as the FT and Canard Enchainé, the satirical newspaper, did this week, that the report was altered for political reasons after Mr Breton's appointment. "We respected the most strict procedures," said Mr Rameix.
The AMF admitted there was more than one version of its report into Rhodia. The initial "pre-report" was completed by investigators on January 20 2005 after a 19-month inquiry into allegations of misleading communications and accounts at Rhodia between 2001 and 2003.
Mr Rameix said this "pre-report" was discussed at a meeting with him and other top officials on January 31, during which modifications were decided. He said the parts of the report that were "legally the least defensible" were rewritten or removed. This was common practice.
Mr Rameix said he called a second meeting on March 1 to confirm the changes to the report. But before that, the revised version of the report was sent to a handful of top officials on February 24 and 25. Mr Breton was named finance minister on the evening of February 25.
Mr Breton, chairman of Rhodia's audit committee from 1998 to 2002, has repeatedly denied any wrongdoing. His offices and his home were searched last year by investigating judges in their criminal inquiry into Rhodia.
Despite the AMF's denial of the accusations, there were still lingering doubts about its independence.
Collette Neuville, head of ADAM, the French minority shareholder group, said there was a natural instinct in France to try to cover up financial scandals at big companies to avoid damaging the reputation of the "place de Paris".
"When Enron and WorldCom happened in the US, we said in France that kind of thing never happened here," said Ms Neuville. "But is this because there are no scandals in France or because we hide them? The Rhodia affair is France's Enron."
Rhodia looks set to become a political issue, as France gears up for a presidential election in 2007. The opposition Socialist party has called for Michel Prada, the head of the AMF, to attend a parliamentary hearing to explain the regulator's handling of the Rhodia affair.
But a spokesman for Jean-Marc Ayrault, leader of the Socialist group in the national assembly, said the request was blocked by the ruling centre-right majority. Several Socialists have called for a parliamentary probe into Rhodia, but this could not be launched until judicial investigations were completed.
