PARIS (Reuters) - A corruption investigation is circling closer to President Nicolas Sarkozy as a third ally comes under pressure in the so-called "Karachi Affair", accused of alerting a friend in police custody to secret witness testimony.
A preliminary judicial inquiry opened on Friday into the leak after French media reported that presidential adviser Brice Hortefeux had told Thierry Gaubert, another Sarkozy ally, about secret testimony made against Gaubert by Gaubert's wife.
The implication of Hortefeux, a former interior minister in Sarkozy's conservative government, has intensified focus on the sprawling Karachi Affair, a corruption case linked to arms sales and a deadly bombing in Pakistan in 2002.
Sarkozy's office issued a statement this week, seven months before he is expected to run for re-election, saying he had nothing to do with any aspect of the case.
While there is no direct legal risk to Sarkozy, who cannot be prosecuted in office, growing interest in the case could crimp a meagre revival in his poll scores as it spreads to another of his allies.
The Karachi Affair refers to an investigation into a 2002 Karachi bombing that killed 15 people including 11 French nationals. Investigators suspect the bombing was a reprisal for former president Jacques Chirac's decision to stop paying commissions to Pakistan on submarine sales.
Judges suspect a number of French conservative politicians received kickbacks from the sales and used the proceeds to help to finance Edouard Balladur's 1995 presidential campaign.
SUITCASES OF CASH
Sarkozy was budget minister under Balladur and spokesman for his campaign.
The investigation opened on Friday by a Paris judge will seek to determine how the secret testimony linked to the Karachi Affair was leaked.
Hortefeux, Sarkozy's interior minister until February, denied media allegations that he had known details of the witness report before they were reported by French media, and offered on Friday to speak to a judge about the alleged leak.
"This is a direct intervention by an adviser to the president, a member of the executive branch, to hamper the search for truth. It's very serious," Olivier Morice, lawyer for the Karachi blast victims' families, told RTL radio.
Gaubert and another Sarkozy ally, LVMH executive Nicolas Bazire, were placed under investigation this week on suspicion of handling kickback cash from Pakistan. Gaubert and Bazire both deny wrongdoing.
Hortefeux's denial followed a report in the centre-left daily Le Monde describing a conversation between him and Gaubert when the latter was in police custody in early September.
According to a leaked police transcript of a recording, quoted by Le Monde, Hortefeux spoke to Gaubert by phone shortly after Gaubert was taken in for questioning. Hortefeux allegedly told Gaubert that Gaubert's wife Helene was speaking to investigators about his role in the case.
"Apparently, she's blabbing quite a lot, Helene," Le Monde quoted Hortefeux as telling Gaubert.
The wife, a royal heiress known in France as Helene of Yugoslavia, said she had testified to police that her husband had made trips abroad in the 1990s and returned home with suitcases full of cash.
"I confirm what I said, about my husband's travels, especially abroad, and the fact of coming home with suitcases," she told Europe 1 radio.
Sarkozy's office on Thursday said he was not mentioned anywhere in the investigation and allegations against him were "imaginary". It also said he had had nothing to do with the financing of Balladur's presidential campaign.
As the presidential election nears, political opponents are unlikely to let the Karachi Affair fall from public view.
"If the president is in good faith, if he considers that he really has nothing to hide, why not declassify (key files in the case)?" Jean-Marc Ayrault, head of the Socialist group in the National Assembly, told the news channel iTele.
(Reporting By Thierry Leveque, Gerard Bon and Nick Vinocur; writing by Nick Vinocur; Editing by Sophie Hares and Kevin Liffey)
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