COLUMN ONE : The ‘Little Judges’ Who Could : France’s once-timid magistrates take on the big-money ties between politics and business. Many people worry that corruption scandals could surpass those that have rocked Italy.

Didier Schuller, a cocksure political operator with friends in high places, was in deep trouble. And everyone in France knew the source of that trouble was Eric Halphen, a dogged and media-shy magistrate.

He was investigating Schuller and others on charges of accepting kickbacks from public housing contracts and funneling them into the conservative Rally for the Republic, the most powerful political party in France.

And the judge was closing in. In December, he staged a surprise raid on Schuller’s office here, carrying away potentially incriminating documents.

A Byzantine plot was devised to discredit Halphen and get him removed from the case. Using telephone taps approved by the prime minister’s office, Schuller and the police set a trap for Halphen’s father-in-law, Dr. Jean-Pierre Marechal, a staunch Rally party supporter and prominent sex therapist who had treated members of Schuller’s family.

At first, the plan went smoothly. Schuller told police that Marechal had offered to influence his son-in-law to back off the case. And on the police tapes Marechal is heard agreeing to return early from his Caribbean vacation in exchange for a “biscuit” of 1 million francs (about $200,000).

Schuller met the doctor at the Paris airport and handed over a suitcase full of cash. Police swooped in.

But Schuller’s scheme quickly unraveled. President Francois Mitterrand refused to remove Halphen. Then a court threw out the case against Marechal, declaring the wiretap illegal.

L’affaire Schuller-Marechal was remarkable for its brazenness if nothing else. But in France these days, it has plenty of company. Dozens of corruption investigations are laying bare shady dealings in the highest offices of government and the most powerful corporate boardrooms.

Driving those cases are men and women such as Halphen, part of a new generation of juges d’instruction , whose job in the judicial system is to gather evidence and bring culprits to trial.

Overworked and often poorly paid, these “little judges,” as they are sometimes called, were once held in low esteem. Although armed with judicial powers far exceeding those of an American prosecutor, they long were ridiculed for their timidity as well as their awe of the rich and powerful.

But, cheered on by the media and public, they are showing a determination to expose the cozy links between politics and business, daring for the first time to raid the offices of Cabinet ministers and company presidents and to throw political and business leaders in jail.

Their attitude is summed up by Thierry Jean-Pierre, among the most prominent of the 600 investigating magistrates.

“Corruption in France belongs neither to the right nor the left,” he said. “It is everywhere.”

But, Jean-Pierre added, “it serves no purpose to try to moralize. We must take realistic action now. The political class is not completely rotten. But we must cut off the dead branches.”

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All across France the political tree is being pruned. An elite once virtually immune to scrutiny is under fire.

The scandals have already cast a long shadow over upcoming presidential elections. The wiretapping of Marechal has almost single-handedly wrecked the aspirations of Prime Minister Edouard Balladur of the Rally party. With less than a month to go before the elections, polls indicate that Balladur has lost a strong lead to his ideological soul mate, Paris Mayor Jacques Chirac.

But the Schuller investigation has targeted former top aides of Chirac as well, and the ramifications of these cases reach far beyond the elections.

The National Assembly passed laws in December that will open the books of political parties to closer scrutiny and curtail corporate financing of those parties.

Even the French passion for privacy has fallen victim to the new openness. Under pressure from the media, political candidates are for the first time opening their tax returns and their net worth to public scrutiny.

Despite that, most citizens still believe that the pot-de-vin , or jug of wine, as bribes are known colloquially, is an endemic problem.

“These cases of corruption are scandalous,” said Serge July, respected editor of the Paris newspaper Liberation. “Everyone shut their eyes to the financing of political life in France. And everyone lived with the hypocrisy. What is happening now is a real revolution.”

So far, probe targets include at least three mayors, two presidents of important companies, the general secretary of the Socialist Party, four former Cabinet ministers from current conservative as well as past Socialist governments, a TV newscaster and half a dozen Parliament members.

Their alleged transgressions range from million-dollar graft to theft of parking meter proceeds.

In one celebrated case, a Parliament member who owned a soccer team allegedly bribed a competing coach to throw a game. In another, a former Cabinet minister is accused of using kickbacks from a company doing public business to build a second home on the Riviera. And a highly respected former Cabinet minister for the disabled is charged with fraud and abuse of the public trust.

The most recent anti-corruption case to surface was in Paris, where a judge this month removed Pierre Suard as president of Alcatel Alsthom, the world’s No. 1 supplier of telecommunication equipment, a company with annual earnings of $1.4 billion.

The company is accused of overbilling the state-owned phone company. The silver-haired executive also is accused of using company money to install a $700,000 security system at home. He denies wrongdoing, but his case was not helped by disclosures that he paid $6,000 to have a whistle-blower in the case followed.

Liberation, in a recent editorial, said Suard’s troubles are an indictment of “the whole French system--close ties between the government and companies (and) the impunity of bosses.”

In fact, Suard, one of the highest-paid executives in France, is only the latest in a long line of prominent bosses embroiled in criminal investigations.

Guy Dejouany, chairman of Generale des Eaux, which provides nearly half the country’s water under contracts with local governments, is charged with bribing government officials.

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And Didier Pineau-Valencienne, chairman of Schneider, an engineering conglomerate, was arrested in Belgium during a business trip last fall and held for 12 days on charges of misappropriating more than $140 million. The executive, who has denied the charges, was released but has refused to return to Belgium.

So far, most of the cases remain in the investigative stages. But they clog the newspaper pages in a country where the names of alleged perpetrators become public once a judge declares them formally “under investigation.” And that is usually long before a court is asked to find them innocent or guilty.

The first major trial to focus on the unholy marriage of business and politics opened recently in Lyon, France’s second-largest city. And its layers of intrigue, gooey as a boulangerie pastry, make for popular reading in the morning papers.

In the case, the mayor, his estranged son-in-law and one of the nation’s best-known TV anchormen are on trial for corruption. Pierre Botton is accused of embezzling more than $9 million from his companies during the 1980s and pumping the proceeds into his father-in-law’s political career.

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Among those accused of enjoying Botton’s ill-gotten gains are anchorman Patrick Poivre d’Arvor, who allegedly accepted $200,000 in luxury vacations and fancy meals; a nephew of former President Valery Giscard d’Estaing, and the mayor of Cannes.

The anti-corruption probes have spurred a round of soul-searching among voters, business leaders and, especially, politicians. Many worry that the level of corruption may already surpass the notorious scandals that have rocked Italy. And, the French are asking, who--or what--is to blame?

“Some of these officials are dishonest, others unlucky and still others are innocent,” said Guy Sorman, a conservative columnist for Le Figaro, the largest Paris daily newspaper. “But all embraced money and power at the same time. And on that point, you can’t tell one from the other.”

To Serge July, the Liberation editor, the scandals represent a long-overdue reassessment of one of French society’s most vaunted professions.

“Politics is in the process of being removed from the pedestal,” he said. “Long ago, when the Catholic Church was making Popes in Italy and saints in Spain, it was making politicians, in the form of cardinals, in France. Politics is at the heart of French culture.”

The line has long been blurred between politics and business in France, where petty graft on both the left and the right has been winked at or ignored by voters. A recent poll indicates that nearly two in three residents believe that their politicians are corrupt.

But the problem has grown substantially over the last decade, partly because of a decentralization of power begun under the Socialists in 1982 that sharply increased the number of politicians with the authority to approve contracts.

In 1988, corporate contributions were limited to $100,000 per party per year. But financially strapped parties cruised the back roads, stuffing their war chests with funds from inflated charges for advertising in party newspapers and “commissions” paid to political consultants for help in winning government contracts.

Some politicians also exploited the system for their personal comfort, accepting cash, travel and home improvements from those same companies.

That is one of the reasons the National Assembly in December banned corporate financing of parties and ordered political officials to open their personal books within two months of their election. But the lawmakers could not agree on a proposal to limit the number of offices one politician can hold. Of the 577 members of the National Assembly, more than one in five hold other local offices.

Critics say that encourages graft by allowing politicians to peddle influence locally and nationally.

On the other hand, some believe that the magistrates have become too powerful, unfairly sapping public confidence in business and politicians. But that is not a widely held view. When the National Assembly tried to pass a law curtailing the power of investigators late last year, it was forced to abandon the effort under media pressure.

“In France, we cannot do without the ‘little judges,’ ” said Jean-Pierre, whose past investigations uncovered shady deals involving close associates of Mitterrand. “To get rid of them would be extremely dangerous, because it would be an invitation to all the adventurers.”

In fact, one reason the magistrates are called “little judges” is because they function more as prosecutors than judges. They do not have the authority to decide guilt or innocence in court; that is the job of a courtroom judge.

The job of the “little judges” is to lead investigations and present cases against defendants in court. Unlike U.S. prosecutors, they have the power to subpoena witnesses and issue search warrants.

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Halphen, a 35-year-old magistrate who wears round spectacles, has employed all those powers in his 18-month investigation of “false invoices” in governmental departments that include Paris and Clichy, a northwest suburb.

Both areas are controlled by Rally for the Republic. In Paris, party founder Chirac has been mayor for 17 years. And Clichy is the support base for another party stalwart, Interior Minister Charles Pasqua.

The allegations primarily concern funding for the party with rake-offs from contracts with companies building low-cost housing. But the probe has also included other shady methods of party financing, including hugely inflated ad rates for Le Clichois, the party newspaper run by Schuller.

Halphen has steadfastly declined to be quoted by the media, but he has not shied away from naming his targets--18 so far. One of them, Michel Roussin, was forced to resign his Cabinet post last November. He had been Chirac’s chief aide at City Hall.

Halphen’s inquiry was threatened in December when police arrested his father-in-law, who works at the American Hospital of Paris. (Halphen’s wife is a magistrate in Paris.)

Schuller contended that he had been approached by Marechal, who offered to get his son-in-law to drop the case in exchange for a cash payment. But there were no witnesses, and it was not until after Halphen raided his office that Schuller went to his friend Pasqua with the allegation.

The wiretap was arranged and Marechal was eventually arrested, triggering calls for Halphen’s removal. But Mitterrand, expressing concern over the attempt to manipulate the kickback probe, backed the judge, who has since redoubled his investigative efforts.

The political powder keg did not explode until February, when a court declared the wiretap illegal and transcripts were revealed.

After the court ruling, the wiretap itself became the issue.

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Under French law, the prime minister’s office can approve wiretaps only in cases of national security. Balladur at first defended the wiretap but a day later admitted that the police request had erroneously cited national security as a justification. In the wake of the scandal, the national director of police resigned.

The tapes were an embarrassment for Halphen, personally as well as professionally. In the conversations, Marechal is heard telling Schuller that his daughter is on the verge of divorcing Halphen. And the psychiatrist suggests that his daughter’s new boyfriend may be a political plant designed to distract the investigating judge.

But the big loser was Balladur. His lead in the presidential polls disappeared. His most important supporter, Pasqua, was also left discredited. And the Interior minister’s attempt to divert attention from the scandal, by leaking details of French government demands that five American CIA spies leave the country, was viewed dimly by many in France.

As for Schuller, he has fled the country, claiming harassment by the media. None of his associates will reveal where he is.