The 58-year-old Villepin served as France's presidential chief of staff, then as foreign affairs minister, and finally as prime minister under Jacques Chirac, the former president who was involved in some shady dealings of his own. In 2011, four years after he had left office, he was convicted on embezzlement charges.
Villepin, a right-leaning politician, had planned to run against then-President Nicolas Sarkozy in France's presidential election this year. The announcement was met with surprise; Villepin had long been Sarkozy's arch-rival, but his candidacy had threatened to split the conservative vote.
At the time, Villepin had only just been cleared of another political scandal. That controversy revolved around allegations that he failed to stop conspirators who sought to smear Sarkozy in 2004 by putting his name on a fraudulent list of bank accounts that were associated with money-laundering.
But then came these new accusations, which first cropped up in December and effectively destroyed Villepin's 2012 presidential bid.
"It's unbearable that I am being implicated in a matter I have nothing to do with," he said at the time, according to the Telegraph.
The scandal centers on a man named Regis Bulot, who headed the high-end hotel association Relais & Chateaux until 2005. He has been charged with embezzling $1.92 million from the organization, though he denies it.
Bulot was a political supporter of Villepin, and the French daily Le Monde says it gained access to tapped phone records that showed Villepin attempting to illegally protect Bulot from the investigation.
Villepin was questioned by French authorities in a seven-hour session on Tuesday, according to France's BFM-TV.
The much-beleaguered politician was once known for a speech he gave when he was Chirac's foreign affairs minister in 2003. He asserted, forcefully and eloquently, that Chirac would in no way participate in the United States-led invasion of Iraq.
"In a world where the threat is asymmetrical, where the weak defy the strong, the power of conviction, the capacity to convince, the ability to sway opinion count as much as the number of military divisions. They do not replace them. But they are indispensable for enhancing a state's impact on the world," he famously said in an address to the United Nations Security Council in New York City.
But those days are long gone; Villepin's reputation has deteriorated considerably. He denies any wrongdoing in this latest fiscal debacle.
"I was able to restate calmly and simply in what is standard procedure that I'm in no way implicated in the sorry affair that involves one of my friends," he said in a statement.