4 Aug 2011

New IMF chief Lagarde faces investigation

French judges order an investigation into the role of new IMF head Christine Lagarde for approving a compensation payout to a friend of President Nicolas Sarkozy when she was French finance minister.

New IMF chief Lagarde faces investigation

A French court has ruled that Christine Lagarde should be formally investigated for approving a multi-million euro payout to a prominent businessman in 2008.

The Court of Justice of the Republic decided that an investigation should be launched after prosecutors claimed Ms Lagarde abused her authority in a much-criticised arbitration deal.

A 285m euro payment to Bernard Tapie was approved in 2008 to settle his claim that former state-owned bank Credit Lyonnais defrauded him in the 1993 sale of his stake in sports clothing business Adidas.


Tapie – a former left-wing government minister who switched sides to support Sarkozy’s 2007 presidential campaign – had lost the case in 2006 and was appealing against the decision when Sarkozy won power.

Lagarde, who denies any misconduct, overruled objections from some ministry officials to drop the judicial case and pressed ahead with the arbitration, arguing that it was needed to resolve the long-running case swiftly.

There is no suggestion she profited personally in any way from the final settlement.

Ms Lagarde was appointed director of the International Monetary Fund (IMF) last month after her predecessor, Dominique Strauss-Khan, resigned to face allegations of attempting to rape a maid in a New York hotel. Wary of further embarrassment, the IMF wrote tougher ethical guidelines into Lagarde’s contract.

Speaking to reporters after Thursday’s decision, Lagarde’s lawyer said his client felt confident an investigation would “get to the bottom” of what happened and prove there was nothing wrong with the deal.

It is likely the investigation will take months to conclude and a decision is made on whether to send the case to the special court for a trial.

An inquiry could take months to get started as it cannot begin until a replacement is found for Jean-Louis Nadal, the public prosecutor who recommended the inquiry at the request of opposition Socialist party lawmakers but then retired in June.

The court was initially due to make its decision in early June, but judges asked for more time to weigh the evidence.