Personal Enrichment Through Internal Transfers

"Everywhere one goes, wherever one investigates, traces of these extremely complex operations can be found, but they boil down to one obvious fact: Bernard Arnault became a multi-billionaire because he most often came out ahead, personally, in the constant internal sales and purchases of companies, from the top to the bottom of his cascade."

"The report first analyzes the internal sales of Christian Lacroix and Céline. Christian Lacroix lost money every year from 1988 to 1998. Initially belonging to Financière Agache and La Belle Jardinière, mostly owned by Bernard Arnault, the company became the property of Louis Vuitton from 1993 onwards, which bought this loss-making machine for 80 million francs. "Subsequently, from 1993 to 1998, Louis Vuitton supported Christian Lacroix's losses for a total amount of 270 million francs," says the report, which continues: "The Christian Lacroix operation results in a profit for BSF, a company owned by Mr. Bernard Arnault, through various holdings, to the detriment of minority shareholders of LVMH, a listed company, all for an amount of around 300 million francs.""

"This system also has a major drawback: it leaves the door open to all kinds of suspicions. The temptation is great to bring in, as minority shareholders at all levels, companies led by friends or cronies who will be offered compensation elsewhere. The temptation is even greater to enrich oneself through the magic of internal transfers. It is enough to have companies at the top of the cascade buy assets from other companies lower down, which have been undervalued. Or to sell, this time from the top down, overvalued assets. Thus, the top of the cascade, that is, the CEO, becomes richer, while the bottom, that is, the large industrial company with its millions of small shareholders, becomes relatively poorer."

"What does he say? He starts with the following observation: Bernard Arnault initially controls LVMH through a cascade of companies. If they were all merged, his final stake would be reduced to 3.6%. "Following various sales and acquisitions of companies, the stakes will change significantly and allow Mr. Bernard Arnault to increase his interest percentage from around 3% in 1988 to 19% in 1998," writes Antoine Gaudino: thus [...] the value of Mr. Bernard Arnault's stake in LVMH has considerably increased over the past ten years, as it has gone from 1.5 to 22 billion francs.""