February 7, 2014 / 10:32 AM / 4 years ago

CORRECTED-UPDATE 1-Head of France's BPCE probed over conflict of interest-source

(Corrects second and fourth paragraphs to make clear Perol was not directly nominated by Sarkozy)

PARIS, Feb 6 (Reuters) - The chairman of BPCE, France’s second-biggest retail bank, was put under judicial investigation to determine if his nomination to head the group in 2009 represented a conflict of interest, a legal source told Reuters on Thursday.

Francois Perol - an ex-civil servant who was parachuted in to head the bank under the Nicolas Sarkozy administration - had previously worked at investment company Rothschild & Cie, which played a key role in the state-backed merger that created BPCE.

Perol, 50, appeared in a closed Paris courtroom on Thursday to answer questions from an investigative magistrate. BPCE declined to comment immediately on the hearing.

The appointment of Perol, who was Sarkozy’s economic adviser at the time, to head the newly merged regional banks Caisse d‘Epargne/Banque Populaire (BPCE) aimed to prevent its Natixis investment bank unit from collapsing during the financial crisis.

The appointment has been criticised by left-wing and some right-wing politicians in France, who argue that Sarkozy might have wielded too much influence over the bank.

They have also cited a possible conflict of interest given that Rothschild & Cie, Perol’s employer at the time, worked on the BPCE merger.

Two trade unions had pushed for the investigation.

“All I can say is that since Perol is there, BPCE is going well,” Laurent Mignon, CEO at Natixis told Reuters in a January interview. “We have seen a turnaround in Natixis these last four years.”

Conflict of interest is punishable by five years’ imprisonment and 500,000 euros ($680,000) fine. French law prohibits public servants being hired by companies over which they have direct authority.

Being placed under formal judicial investigation in France means that “serious or consistent evidence” exists pointing to probable implication of a suspect in a crime.

It often leads to trial, but not always, and does not mean those put under investigation have to step down immediately from their posts. ($1 = 0.7353 euros) (Reporting by Gerard Bon and Maya Nikolaeva; Writing by Alexandria Sage; Editing by Tom Heneghan)

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