Minister resigns in cash scandal

November 12, 1999

PARIS

Investigations into corruption and misuse of funds at France's biggest student social insurance society have led to the resignation of the country's economics and finance minister, Dominique Strauss-Kahn.

The cash scandal has presented the Socialist-led governing coalition with the most serious crisis since it came to power in June 1997.

Mr Strauss-Kahn stepped down after detailed allegations appeared about a fee of E93,000 (Pounds 58,800) paid to him for work he allegedly did in helping the sale of a subsidiary of the Mutuelle des Etudiants de France (MNEF) to a major public company.

Magistrates investigating the affairs of MNEF, which embraces a number of dependent enterprises and holding companies, have asked to interview Mr Strauss-Kahn about the nature of the legal work he actually did in connection with the sale, for which another firm was paid about E183,000 (Pounds 117,000).

There are also allegations that documents relating to the commissioning of the work in the period between 1994 and 1996, before Mr Strauss-Kahn became a minister, were drawn up much later and back-dated.

Reports in the French press suggest that the paper and word-processing software used in the production of the letters did not exist until after the letters were allegedly sent.

The affair, which has shaken the government and deprived it of a key minister who enjoyed considerable respect at home and abroad, has cast light on the links between the MNEF, which provides medical insurance for 812,000 students as well as housing and other services, and the Socialist Party.

Most of its governing body belong to student organisations close to the party.

It is not clear whether it is alleged that the money paid to Mr Strauss-Kahn, which he duly declared at the time to the tax authorities, was for his personal use or for the benefit of the Socialist Party.

Worryingly for the Socialists it appears unlikely that the investigation will stop with Mr Strauss-Kahn. Several other major figures in the party have or have had close ties with MNEF.

One of the political assets of the government has been a reputation for integrity that contrasted with the murky activities of the preceding administration. It is in danger of losing that advantage.

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