French police detain key figure in smear scandal case

PARIS, May 30 (Reuters) French police today remanded in custody a business executive linked to an alleged plot to smear Interior Minister Nicolas Sarkozy, a leading contender for next year's presidential elections.

Jean-Louis Gergorin, a vice-president at European aerospace giant EADS , was detained after presenting himself for questioning by financial police in Nanterre, a suburb west of Paris, judicial sources said.

The former diplomat, whom EADS plans to fire, has admitted in press interviews being the anonymous source behind information which prompted a probe into accusations that leading politicians, including Sarkozy, held secret bank accounts.

The affair, dubbed Clearstream after the Luxembourg clearing house where the accounts were said to have been held, has escalated into a major political row which has ensnared Prime Minister Dominique de Villepin.

Leaked case documents have fuelled suspicions Villepin used secret investigations into the case by the intelligence services to discredit Sarkozy, his rival to represent mainstream conservatives in 2007 presidential elections.

Villepin says he was only doing his duty having alleged malpractice investigated.

Versions of Sarkozy's name appeared on list of Clearstream accounts that were subsequently determined to be fake.

Investigating magistrates hunting for the author of the faked bank account list ordered Gergorin's detention and are expected to interview the businessman again at a later date.

The Clearstream affair is linked to a graft scandal resulting from the controversial sale of French frigates to Taiwan in 1991.

French media have portrayed the Clearstream affair as symptomatic of a business and political elite out of touch with ordinary folk and obsessed by personal gain and power struggles.

Villepin has failed to dispel suspicions he sought to use Gergorin's information to damage Sarkozy at a time when his bitter rival was aiming to take control of the ruling Union for a Popular Movement (UMP) party.

Sarkozy's election as UMP boss in November 2004 was seen as a major stepping stone in his bid to campaign to succeed President Jacques Chirac in 2007. Villepin is a Chirac loyalist.

Gergorin has challenged Villepin's assertion he was just doing his duty, saying the prime minister sought to keep Sarkozy in the dark about investigations into the corruption probe. Clearstream, a unit of German stock market operator Deutsche Boerse AG , has said it could sue for defamation against Gergorin, who has said his information was obtained from a source who hacked into the bank's systems.

REUTERS SY PM1949