Bernard Arnault, the chairman of LVMH Group, the world’s largest luxury goods giant, testified in court yesterday. His eldest son Antoine Arnault and two other executives accompanied him, attracting widespread attention from the market.
Bernard Squarcini, the 68-year-old former director of the French National Security Agency, is accused of 11 crimes including influence peddling, abuse of public funds and divulging French national security information during his leadership of the intelligence department and while serving LVMH.
Arnault particularly emphasized his “witness” status in court yesterday and claimed to have no knowledge at all about the spy orders received by Squarcini. At that time, his capable assistant, the former vice president of the group, Pierre Godé, was responsible for all the group’s security matters, and Pierre Godé died in 2018.
Squarcini served in the French national security department DGSI, the country’s main domestic intelligence agency, from 2008 to 2012. During this period, Squarcini used public resources to dispatch his intelligence agents to monitor a person who claimed to have evidence of Arnault’s extramarital affair and was blackmailing him.
After leaving the French national security department, Squarcini founded his own private intelligence consulting company, Kyrnos Conseil, and was immediately hired as a consultant for LVMH, signing an agreement worth 2 million euros with the group.
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François Ruffin was once a journalist and founded the newspaper Fakir from 2013 to 2016. Before being elected as a French MP in 2017, he produced a satirical film about Arnault called “Merci Patron (Thank You, Boss)“, which tells the story of LVMH moving its clothing factories out of France, resulting in local workers losing their jobs. It exposes the bad behavior of LVMH as the largest French luxury goods group, directly targeting Arnault himself.
According to the prosecutor’s accusations, during the production of “Merci Patron” in 2013, LVMH hired Squarcini to infiltrate Ruffin’s newspaper Fakir and to stalk and monitor the producer François Ruffin, interfering with the creation of the documentary. This operation lasted for three years.
This film was finally released in 2016 and was a great success. It won the Best Documentary Award at the César Film Awards the following year and also became a key bargaining chip for François Ruffin in his campaign for a parliamentary seat. Since then, LVMH has been under long-term public criticism.
In 2019, Francois Ruffin officially filed a lawsuit against Squarcini. The prosecutor accused him of using public resources to monitor ordinary citizens and providing protection for Arnault during his tenure as the head of the national security department.
The prosecutor’s charges against Squarcini also involve Hermès, one of LVMH’s biggest competitors, claiming that it was entrusted by LVMH to monitor the heirs of the Hermès family.
Another defendant in this case is Laurent Marcadier, a former judge and former head of LVMH’s asset and human security, who is accused of allegedly providing Squarcini with information about Hermès’ lawsuit against LVMH.
In 2021, LVMH paid a settlement of 10 million euros to the French judicial authorities, ending the investigation into LVMH that the court had initiated in 2011, and no longer bearing any legal risks for this case. This ruling angered Francois Ruffin at the time, who bluntly said that 10 million euros accounted for only 0.02% of LVMH’s nearly 45 billion euros in revenue a year earlier.
Due to having paid a settlement three years ago, Arnault does not need to bear any legal responsibility for this case. Only under the strong request of François Ruffin and his lawyers, did he appear as a witness in Squarcini’s trial.
According to Reuters, Arnault’s testimony lasted nearly three hours, with occasional intense words, and he was obviously annoyed by the questions from lawyer François Ruffin. He said that François Ruffin’s side insisted on involving him in this case to gain political benefits and promote his latest film “Au boulot (It’s Time to Work)”. He said that although “Merci Patron” criticized him and his company, he actually liked that film.
Arnault also emphasized that LVMH pays 8 billion euros in taxes to France every year and is one of the groups that recruits the most employees in France.
In addition to its traditional luxury business, LVMH’s business empire has penetrated into various fields of French society, including the media, entertainment, and sports industries. LVMH sponsors the 2024 Paris Olympics and has become a sponsor of Formula 1.
Last month, LVMH acquired Paris Match for 120 million euros. It, along with Les Echos and Le Parisien, are among the mainstream media in France. Additionally, the Arnault family’s investment company, Agache, announced a few days ago that it will jointly with Red Bull acquire a majority stake in Paris Football Club (ParisFC) to compete with Paris Saint-Germain.
The leaky roof meets continuous rain. The two-week trial undoubtedly puts Arnault in the spotlight of public opinion, while LVMH is facing the severe challenge of the slowdown in the luxury goods market growth.
According to Fashion Business Daily, LVMH’s revenue for the first three quarters of this year decreased by 2% to 60.75 billion euros, falling short of market expectations. The group’s revenue in the third quarter decreased by 4.4% to 19.07 billion euros.
Two weeks ago, Arnault made seven personnel changes for LVMH in his personal capacity and reshuffled the top management of the group.
At the same time, Arnault has placed his five children in front-line operational positions in the group, making the inheritance battle of this former world’s richest man’s family attract global attention. Previously, Arnault raised the age limit for the group’s CEO from 75 to 80 in order to gain more time to pave the way for his children’s future development in LVMH. The 94-year-old Buffett even wrote a letter to him specifically, believing that the maximum age limit he set is too low.
It is worth noting that the tax increase proposal that the French government plans to introduce recently may require LVMH to pay an additional tax of up to 800 million euros. This proposal is expected to raise 8 billion euros in 2025. Analysts believe that the purpose of this tax increase is to help France reduce the budget deficit, but it may impact investor confidence and affect the performance of the French stock market.
Since the beginning of the year, LVMH’s share price has cumulatively dropped by 18% to 589 euros, and its market value has fallen below the 300 billion mark to approximately 296.3 billion euros.
According to the Bloomberg Billionaires Index, since the beginning of this year, Arnault’s net worth has decreased by nearly $40 billion to $160.8 billion, making him the person with the largest loss among the world’s top 500 billionaires, and his ranking has dropped to fifth.