By Gérard Bon and Alexandria Sage
PARIS (Reuters) - French police questioned flamboyant tycoon Bernard Tapie on Monday in a fraud investigation that threatens to damage ex-president Nicolas Sarkozy's hopes of a political comeback.
Tapie, a member of France's business and sporting elite, says he has nothing to hide in the affair which has embroiled members of Sarkozy's cabinet, including IMF chief Christine Lagarde, his former finance minister.
While both Sarkozy and Lagarde deny wrongdoing, the case is one more legal headache for the former president whose supporters would like to see run for the top job again to rescue his divided conservative party.
The investigation is into whether a 285 million euro ($374 million) financial award that Tapie won in 2008 was a result of political influence.
"I'm not worried about the merits of the case," said 70-year-old Tapie, who served as a minister in Socialist President Francois Mitterrand's government in the 1980s, but moved to the right and backed Sarkozy at the 2007 election.
"I'm wondering what they could possibly find," he told Europe 1 radio shortly before being taken in for questioning by police specialized in financial crime.
Tapie alleged that the now-defunct bank Credit Lyonnais defrauded him by purchasing his interest in sports clothing company Adidas in 1993 for 315.5 million euros only to sell it a year later for 701 million euros.
Investigators are trying to determine whether the close ties between Tapie and members of Sarkozy's inner circle influenced the government's decision in 2007 to turn to a private arbitration tribunal to settle the long-running dispute.
The arbitration went in Tapie's favor with an award which, including interest, amounted to 403 million euros.
Under French law, Tapie - the owner of a regional newspaper chain whose has raced cars, dabbled in acting and bought cycling and soccer teams - could be kept in police custody for as long as 96 hours as he is questioned on suspicion of organized fraud.
Socialist President Francois Hollande, who came to power just over a year ago vowing to rid France of what he said were unfair advantages accorded to the elite under Sarkozy, has said he wants to get to the bottom of the arbitration affair.
He has continued to back Lagarde and the chief executive of France Telecom, Stephane Richard, both of whom have been caught up in the scandal.
Although Lagarde was not placed under formal investigation - a step meaning that "serious or consistent evidence" points to probable implication in a crime, Richard - her former aide - was.
Richard has denied any wrongdoing and plans to appeal the decision.
The investigation of Richard for conspiracy to commit fraud increases the likelihood of a trial that could further tarnish the image of the conservative party, which lost power last year with Sarkozy's defeat to Hollande.
Sarkozy is already distracted by two other legal tangles, one a campaign funding scandal involving France's richest woman; the other involving possible kickbacks for submarine sales to Pakistan in the 1990s when Sarkozy was a government minister.
Hollande's own government has not been immune to scandal. In April, the budget minister quit after it was revealed that he had a Swiss bank account after telling parliament he did not.
($1 = 0.7612 euros)
(Writing By Alexandria Sage; Editing by Mark John and Robin Pomeroy)