Ex-French President Nicolas Sarkozy was placed under formal investigation on Thursday for "abuse of weakness" in a 2007 party funding case involving elderly L'Oreal heiress Liliane Bettencourt, the public prosecutor said.

Under French law, a formal investigation is the final step before a suspect is accused of a crime. Sarkozy, who only this month hinted he could make a political comeback, has repeatedly denied taking campaign funds from Bettencourt.

"Nicolas Sarkozy, who benefits from the presumption of innocence, had been notified that he has been placed under formal investigation for taking advantage of a vulnerable person in Feb. 2007 and during 2007 to the detriment of Liliane Bettencourt," the prosecutor in the south-western city of Bordeaux said in a statement after a hearing.

The 90-year-old Bettencourt is France's richest woman. Sarkozy, who lost last year's election to Francois Hollande, faced members of her staff at the hearing earlier on Thursday.

He was already questioned in November by judges, but they opted not to open a full-blown inquiry into Sarkozy, who has bowed out of politics but remains a possible candidate for the conservative camp in the next presidential contest in 2017.

Initial suspicions over funding were fuelled three years ago when a woman who worked as an accountant for the mentally frail Bettencourt alleged that a large cash withdrawal was earmarked for Sarkozy's presidential election campaign.

Bettencourt was declared in a state of dementia in 2006 and was placed under the guardianship of her family in 2011.

French TV channel BFM quoting Sarkozy's lawyer said the decision was "incoherent and unjust" and he would appeal.

Presented by Adam Justice