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Lagarde’s French probe: IMF board likely to back its chief – sources

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Washington (29th August, 2014): The International Monetary Fund's board is likely to stand behind the global lender's leader, Christine Lagarde, who is facing a criminal investigation in France tied to a political corruption probe, sources close to the board said.

The 24-member board, which has the power to hire and fire the IMF's managing director, has not yet been briefed on the latest turn in the case dating from 2008, but three sources said it was unlikely to view the investigation as something that would interfere with Lagarde's duties.

French magistrates on Wednesday put Lagarde under formal investigation for "negligence" after questioning her in Paris for a fourth time. The long-running saga concerns allegations that tycoon Bernard Tapie won a large arbitration payout due to political connections when Lagarde was French finance minister.

IMF board members discussed the situation after the first three times Lagarde was questioned under her previous status as a witness, and also considered the case's implications when it decided to hire her in 2011.

"On each of those occasions, they have expressed confidence in the ability of the managing director to carry out her duties," IMF spokesman Gerry Rice told reporters on Thursday.

The three sources, who are familiar with the board's thinking but not authorized to speak publicly, said the IMF's directors would likely do so again.

Lagarde's lawyer, Yves Repiquet, who is launching an appeal, said the legal process should not require Lagarde to return to Paris in the meantime.

A two-year appeals process would last beyond the end of Lagarde's first five-year IMF term, which ends in July 2016.

Lagarde's predecessor, Dominique Strauss-Kahn, resigned over sexual assault charges that were later dropped.

While having a second managing director under a legal cloud might not look good for the IMF, the details of this case appear much less serious, the sources said.

The inquiry relates to allegations that Tapie, a supporter of former President Nicolas Sarkozy, was improperly awarded 403 million euros ($531 million) in an arbitration to settle a dispute with now defunct state-owned bank Credit Lyonnais.

Investigators are trying to determine whether Tapie's political connections played a role in the government's decision to resort to arbitration. He has denied any wrongdoing.

Lagarde is accused of "negligence" for not blocking the arbitration that won Tapie a huge pay-out. She has said the case is "without merit."

Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.

Lagarde's lawyer, Repiquet, said the magistrates initially considered whether Lagarde was "complicit" in the misuse of public funds, but later settled on investigating her for the lesser infraction of "negligence."

"Being formally investigated for that does not justify a resignation," he said. "It is a very minor infraction."

The offense carries a maximum penalty of one year's imprisonment and a fine of 15,000 euros ($19,773).

 



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