Four held ‘for giving L’Oréal money to Nicolas Sarkozy’

Four leading figures in the financial scandal enveloping president Nicolas Sarkozy's government were arrested today.

One was society photographer Francois-Marie Banier, the "special friend" of L'Oréal heiress Liliane Bettencourt, who is said to have provided "envelopes full of cash" to Mr Sarkozy and his ruling UMP party.

The government, in turn, is said to have turned a blind eye to Mrs Bettencourt's avoidance of paying tax on her vast fortune in return for electoral funds.

A criminal inquiry has been launched by prosecutors, who today ordered the arrest of Banier, who has benefited massively from Mrs Bettencourt's largesse. He has received close to a £1 billion of "liquid cash", old masters, insurance policies and an island in the Seychelles from the 87-year-old woman.

Detectives from the Paris financial brigade swooped on Banier, as well as Patrice de Maistre, Mrs Bettencourt's financial adviser; her tax lawyer Fabrice Goguel and Carlos Vejarano, the manager of the island of Arros in the Seychelles.

"They are being held as part of an inquiry into alleged money laundering and financial fraud," said a source close to the inquiry.

On Monday night Mr Sarkozy went on live television to try to distance himself from what has become known as L'affaire Bettencourt. He denied corruption, saying he had never personally received cash from Mrs Bettencourt at dinner parties at her mansion in Neuilly-sur-Seine, the fashionable Paris suburb where he was once mayor.

The case, which has been adjourned, exploded into life when 21 hours of telephone conversations involving Mrs Bettencourt, secretly recorded by her butler, came to light.

One features Mr de Maistre, the arrested financial adviser, encouraging Mrs Bettencourt to donate money to Mr Sarkozy. Mr de Maistre is also heard asking Mrs Bettencourt to buy him a yacht through one of her Swiss bank accounts — one which she was allegedly shielding from tax payments.