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IMF chief faces more questioning over payout

Christine Lagarde to explain her 2007 handling of row which resulted in large payment to well-connected entrepreneur.

Last Modified: 23 May 2013 21:00
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Lagarde was named the world's seventh most powerful woman by Forbes magazine [Reuters]

IMF chief Christine Lagarde faces another day of questioning after being grilled for hours by French prosecutors who are deciding if she should be charged over a state payout to a disgraced tycoon during her time as finance minister.

Lagarde has downplayed the investigation, which continues on Friday, but the stakes are high for both her and the International Monetary Fund, which has expressed confidence in Lagarde.

"The executive board has been briefed on that matter, including recently, and continues to express its confidence in the managing director's ability to effectively carry out her duties," IMF spokesman Gerry Rice said in Washington.

Lagarde, 57, was seen leaving a Paris court late on Thursday after being quizzed by prosecutors for around 12 hours.

"See you tomorrow," she told reporters as she left the building.

The Court of Justice of the Republic (CJR), which probes cases of ministerial misconduct, is seeking an explanation of her 2007 handling of a row that resulted in $515m being paid to controversial business figure Bernard Tapie.

Criminal charges against Lagarde would mark the second straight scandal for an IMF chief, after her predecessor Dominique Strauss-Kahn, also from France, resigned in disgrace in 2011 over an alleged assault on a New York hotel maid.

Lagarde, the first woman to run an organisation considered the pillar of the international financial system, was named the world's seventh most powerful woman by Forbes magazine on Wednesday.

'Numerous anomalies'

Tapie, a former politician, went to prison for match-fixing during his time as president of French football club Olympique de Marseille.

Prosecutors working for the CJR suspect he received favourable treatment in return for supporting Nicolas Sarkozy in the 2007 presidential election.

They have suggested Lagarde - who at the time was finance minister - was partly responsible for "numerous anomalies and irregularities" which could lead to charges for complicity in fraud and misappropriation of public funds.

Objectively speaking and knowing the IMF ... I tend to think that if she is charged, they will without doubt ask her to quit her post

- Najat Vallaud-Belkacem, French government spokeswoman,

The investigation centres on her 2007 move to ask a panel of judges to arbitrate in a dispute between Tapie and Credit Lyonnais, the collapsed, partly state-owned bank, over his 1993 sale of sports group Adidas.

Tapie had accused Credit Lyonnais of defrauding him by consciously undervaluing Adidas at the time of the sale and argued that the state, as the former principal shareholder in the bank, should compensate him.

His arguments were upheld by the arbitration panel but critics claimed the state should not have taken the risk of being forced to pay compensation to a convicted criminal who, as he was bankrupt at the time, would not have been able to pursue the case through the courts.

The payment Tapie received enabled him to clear his huge debts and tax liabilities and, according to media reports, left him with millions of dollars which he has used to relaunch his business career.

Lagarde has said the arbitration was necessary to put an end to a costly dispute, and has always denied having acted under orders from Sarkozy.

Lagarde would not automatically be forced to resign as IMF chief if she is charged, but such a ruling would certainly weaken her position and undermine her future ambitions on the world stage.

French government spokeswoman Najat Vallaud-Belkacem told BFMTV that "objectively speaking and knowing the IMF... I tend to think that if she is charged, they will without doubt ask her to quit her post".

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