The summer season is in full swing on the Côte d’Azur and the car park in front of Monte Carlo’s grand 19th-century casino is full of glistening Ferraris, Lamborghinis and Bentleys.
In one of the casino’s richly decorated baroque halls, a trio of young wannabe James Bonds in evening wear are playing blackjack. But the serious high rollers are outnumbered by tourists, and many of the tables are closed. Tonight, at least, the bank is in no danger of being broken.
Instead it is Monaco’s reputation itself that is at stake, amid allegations of financial impropriety that have touched figures close to the royal family.
They center not on the roulette wheel or card table, but instead on the far greater fortunes to be made from building, selling and letting out the hugely expensive apartment blocks that crowd almost every square inch of the tiny principality, even stretching onto land reclaimed from the Mediterranean.
“The gaming industry accounts for only 3 percent of Monaco’s total GDP and the banking sector is not as prosperous as it used to be because there are too many rules from Europe,” said a source close to the palace. “The big money is in real estate and in construction. When the world’s in crisis, people seek refuge here, and when things are going well, they come, too. It’s like in the casino — the house always wins.”
Albert II, 65, who has ruled Monaco since 2005, has long faced speculation about the state of his on-off relationship with his wife, Charlene, 45, a South African-born former Olympic swimmer. But the recent stream of allegations of financial impropriety — described by the prince as “disastrous for Monaco’s image” — are much more dangerous and have cast a shadow over his attempts to dispel the principality’s reputation as a haven for money launderers.
The latest — and most damaging — twist centers on Claude Palmero, 67, who since 2001 has managed the princely house’s financial affairs, just as his father, André, did for two decades before him. A man of few words who dresses in modest grey suits and drives a beaten-up Renault Clio, Palmero’s modest style belies his own wealth and the considerable influence he has long wielded.
A man of few words who dresses in modest grey suits and drives a beaten-up Renault Clio, Claude Palmero’s modest style belies his own wealth and the considerable influence he has long wielded.
On June 6, however, he was summarily dismissed by Albert along with three other senior members of the princely court — known collectively as the “G4” — and obliged to leave the palace under military escort. Then, in the middle of July, the homes of all four were searched by police apparently in search of sensitive documents that they are thought to have taken with them.
Palmero has hit back. In a case due to be heard in the next few weeks by Monaco’s highest court, his lawyers are demanding his reinstatement and $1,100,300 in damages. It will make legal history: it is the first time a decision made by the prince has been challenged in court.
“Monsieur Palmero did not deserve to be treated in that way, it was really unfair,” Marie-Alix Canu-Bernard, a top Paris lawyer who heads his legal team, told me. The decree dismissing Palmero from his position was “without justification or foundation of any kind and particularly vexatious and brutal”, she said.
Albert appears in no mood to back down, however. His lawyer, Jean-Michel Darrois, another star of the Parisian legal world, said that the prince, like a French president or British monarch, had the right to appoint and dismiss those who worked for him — and was not obliged to give reasons for dispensing with the services of his asset manager.
Speculation is rife in the principality that information found by the police on Palmero’s phone and in his archives may prove embarrassing to the prince. Le Monde, the French daily newspaper, described Palmero in a recent report as the man who “makes the palace tremble”.
But in what appears to be a move intended to heighten pressure on his former right-hand man, the prince has also ordered an audit of his asset manager’s activities during his long years in the post, with the aim of “shedding full light on this affair”. Its results are due in the next few weeks.
To benefit from the principality’s generous fiscal regime — there is no income tax — people must buy or rent a home there, as well as satisfy other requirements that typically include having roughly $550,000 deposited in one of its banks.
“If you wanted to buy a studio you might find something fairly decent for around $2 million, while a one-bed would be from about $2.7 million up to almost anything,” said Irene Luke, the co-head of Savills Monaco. At a staggering $55,000 a square meter, property is about six or seven times more expensive than in the adjoining French town of Beausoleil, she said, although likening the two was akin to “comparing Mayfair with Neasden”.
Such eye-watering prices have meant bumper profits for those who build the flats. By far the most successful of the developers has been the Pastor group, which long had an estimated 80 percent of the principality’s market. Its head is Patrice Pastor, reputedly one of the wealthiest men in the principality, who has been nicknamed the “king” of Monaco.
“If you wanted to buy a studio you might find something fairly decent for around $2 million, while a one-bed would be from about $2.7 million up to almost anything.”
The company’s dominance began to be challenged a few years ago, however, when the prince let it be known to aides that he wanted to open up the construction business to rival companies.
Shortly afterwards the damning revelations started to appear on Substack, an internet platform used by self-publishers, under the title Les Dossiers du Rocher (The Rock Files) — a reference to the principality’s nickname. Drawn from millions of hacked e-mails sent between the prince and the “G4”, they appeared to suggest the latter had illegally profited from property deals.
Suspecting Pastor, the four, who insisted on their innocence, began a legal action in an attempt to prove who is behind what they consider a smear campaign. The developer has strenuously denied any connection, however, and retaliated with his own suit.
Albert initially appeared to back Palmero and his colleagues, accusing those behind the accusations of trying to undermine the principality. That all seemed to change in early May, however, after he met Pastor.
Later that month, in an interview with Monaco-Matin, the local newspaper, the prince said that he had “asked those involved in the so-called ‘Dossiers du Rocher’ case to face up to their responsibilities”. After Palmero refused to go, Albert dismissed him, along with the other G4 members: Laurent Anselmi, 61, his chief of staff, Thierry Lacoste, 63, his lawyer, and Didier Linotte, 75, the president of the supreme court.
What was said at Albert’s meeting with Pastor remains a mystery: the palace source said that he thought the prince had been swayed by documents his guest showed him implicating Palmero in wrongdoing, but could not provide details. The Pastor group is closed for the summer holidays and e-mails sent by The Sunday Times asking for clarification went unanswered.
The revelations have come at a sensitive time for Monaco. In January, Moneyval, the Council of Europe’s anti-money laundering body, issued a report that urged the principality’s authorities to intensify efforts to investigate and prosecute those involved in the practice.
Albert is thought to be particularly keen not to see his realm put back on a blacklist of uncooperative tax havens drawn up by the OECD, from which it was removed in 2009. Last month two laws were passed which, among other things, will create an independent authority to lead the fight against money laundering and financial corruption.
The prince clearly hopes such measures will ultimately be enough to burnish Monaco’s image. The events of the next few weeks may determine whether it will prove to be the safe bet he hopes it is.
Peter Conradi is the Europe editor for The Sunday Times