Tractebel , which Suez recently took over by paying 7.5 billion euros ($7.62 billion) for the 49.6% of the Belgian power utility it didn't own, is being investigated by Belgian and Swiss prosecutors for payments totaling 50 million euros it made to three unnamed Kazak nationals, the Belgian newspaper Le Soir reported yesterday. The three businessmen allegedly used the money, accounted for in Tractebel 's books as "consulting fees," to bribe officials of the Central Asian nation and for kickbacks to former Tractebel executives working in collusion with them, the newspaper said.

Tractebel confirmed in a written statement that investigations were under way "into possible money-laundering activities carried on by companies based outside the European Union" and that "amongst those under investigation are some companies and persons with whom Tractebel had business relations in Kazakstan." However, Tractebel declined to confirm Le Soir's account of the 50-million-euro payments.

The Brussels prosecutors' office confirmed the existence of a wide-ranging probe that has come to involve Tractebel , but declined to give any details. A spokesman, Jos Colpin, said the case "was bizarre and complicated" and cautioned that many of the allegations made by Le Soir had yet to be proved and that no one had been charged.

The probe's disclosure brings a quick end to the honeymoon between Suez and Tractebel , coming just a month after the giant French multi-utility completed its buyout. Suez officials in Paris declined to comment beyond Tractebel 's statement. Investor reaction to the probe was muted, even though Suez's energy arm, of which Tractebel is the crown jewel, accounts for more than a third of overall group revenue. Suez shares finished unchanged on the Paris Bourse at 158 euros.

Perhaps more worrying to Suez shareholders was news that Tractebel has set aside a large provision to cover losses from its ailing businesses in Kazakstan, which include a local electricity company
bought in 1996 and the 20-year concession obtained in June 1997 to operate the country's two natural-gas pipelines. Tractebel spokesman Jack Van Hee said a "substantial portion" of a 199-million-euro provision Tractebel has earmarked for "country risks" in its 1999 accounts will go to covering Kazak losses.

The size of the provision raised eyebrows among analysts. Although it was common knowledge that Tractebel had run into trouble in Kazakstan, the company hadn't ever given any indication of how much money was at stake, they noted.

Mr. Van Hee said Tractebel hired an independent expert two months ago to assess the company's investments and risk exposure in Kazakstan. The move could prefigure an exit from the country altogether, Mr. Van Hee conceded, although no decision has yet been made.

Tractebel said it filed a complaint of its own last month with Brussels prosecutors against a former executive and people, who weren't named. Mr. Van Hee identified the former executive cited in the complaint as Nicolas Atherinos, a vice president of Tractebel 's international unit, Electricity & Gas International, who was sacked in 1998. Until he was fired, Mr. Atherinos had been the point man for EGI's investments and ventures in countries of the former Soviet Union.

Mr. Atherinos couldn't be reached for comment.

The Wall Street Journal, 12/28/1999.