A criminal complaint has been sent to the prosecutor's office

Kim Willsher in Paris guardian.co.uk, Tuesday 5 April 2011 16.18 BST

http://www.guardian.co.uk/world/2011/apr/05/former-loreal-boss-faces-allegations

Lindsay Owen-Jones, the former head of the French cosmetics group L'Oréal, is facing accusations of corruption and money laundering in a trading row dating back to the 1990s.

A criminal complaint sent to the public prosecutor's office in Paris claims British-born Owen-Jones, who retired as president of the group last month, also misused company assets and was involved in an "abuse of trust".

L'Oréal has dismissed the allegations as totally "unfounded" saying they are related to a case that was thrown out by the French courts and closed in 2003.

The accusations centre on L'Oréal creating a parallel distribution network or so called "grey market" for its cosmetics brands such as Lancome and Guy Laroche in Russia, Belarus and Ukraine in the 1990s.

Janez Mercun, a Slovenian businessman who lodged the latest complaint, had an exclusive contract to distribute L'Oréal products in the same area at the time.

He claims the company's parallel network was set up through a company in Dubai in order to avoid French taxes and led to the "personal enrichment" of Owen-Jones, 65, and is seeking €34m (£29.9m) damages. Mercun says his company, Temtrade, was distributing L'Oréal products under what it thought was an exclusive contract when the same goods began turning up on makeshift stands in Moscow 40% cheaper.

Two other L'Oréal directors have been named in the lawsuit, according to his lawyer Frédérik-Karol Canoy, who says it is the first time a criminal complaint has been made.

"L'Oréal says the case has been settled, but they are talking about civil proceedings, this is a criminal action," Canoy told the Guardian.

The legal move came as the company was recovering from the damaging and well-publicised falling out between L'Oréal heiress Liliane Bettencourt and her daughter Françoise Meyers-Bettencourt last year.

The family spat – over Bettencourt giving almost €1bn in art, cash and life insurance policies to a society photographer – turned into a political scandal amid claims Bettencourt, France's richest woman, employed the wife of a government minister while hiding part of her fortune in Swiss bank accounts. It was also alleged – and vehemently denied – that she made illegal donations to President Nicolas Sarkozy's ruling right-of-centre UMP party.

The revelation of the latest legal complaint is also a blow for the new head of L'Oréal Jean-Paul Agon as he attempts to put the Bettencourt scandal behind the firm.

L'Oréal said the "so-called revelations" related to a commercial dispute dating back to 1998 that had "already been judged".

"The courts have found in L'Oréal's favour five times with a definitive ruling by the court of cassation [France's highest civil court] back in 2003," it said in a statement.

"These unfounded accusations, highly publicised today as they were at each stage of the legal case, are an attempt to falsely reopen a case that has been closed since 2003."

The row over the direct sales of L'Oréal cosmetics on the "grey market" in Russia in the 1990s has returned regularly to haunt the company.

Mercun distributed L'Oréal products in eastern Europe for 25 years, between 1974 and 1999, through his Swiss-based Temtrade company, but claims L'Oréal had set up a parallel market for its products in Russia using a Dubai-based front company.

In January 1998, L'Oréal agreed to pay Temtrade 20m French francs compensation for the losses it suffered. However, in 2002 Temtrade began further legal action claiming $227m in damages from L'Oréal for "not respecting an exclusive contract". L'Oréal insisted it had already compensated Temtrade and won the case.

In 2007 Temtrade raised the issue again, asking the Paris court of appeal to revise the 2002 judgment dismissing its claim for compensation, in the light of new documents. This was refused by the court.

RUSSIAN BANKER FLEES

A powerful Russian banker has reportedly fled to London after police stepped up their probe into an allegedly fraudulent £280m land deal involving Yelena Baturina, the wife of former Moscow mayor, Yury Luzhkov.

Sources in the Russian capital said Andrei Borodin, the president of Bank of Moscow, had left the country as prosecutors considered laying charges in connection with a loan authorised by the bank.

Borodin and Baturina, a property and construction tycoon, both vigorously deny wrongdoing, and Borodin told the RIA Novosti news agency that he had gone abroad for medical treatment. "I intend to return home as soon as the state of my health allows," he said.

Luzhkov and his wife have come under increasing scrutiny since the former was ousted from his post in September after falling out with the Kremlin. The couple spend a lot of their time in Britain and Austria.

The investigation focuses on a 12.76bn rouble (£280m) loan granted in 2009 by Bank of Moscow – the city government's investment vehicle – to a little-known company called Premier Estate, which had a registered capital of 10,000 roubles (£200). Premier Estate then used the money to buy 58 hectares of land from Baturina's company, Inteko.