IMF chief Christine Lagarde guilty of negligence in surprise verdict

French judges have found IMF chief Christine Lagarde guilty of negligence for failing to challenge a 400 million euro (S$603.2 million) state arbitration payout to a business tycoon in 2008 when she was French finance minister.VIDEO: REUTERS
Ms Lagarde in the courtroom on the opening day of her trial last week. The scandal over a state payout made when she was France's finance minister has overshadowed her work at the IMF, where she began her second five-year term in February.
Ms Lagarde in the courtroom on the opening day of her trial last week. The scandal over a state payout made when she was France's finance minister has overshadowed her work at the IMF, where she began her second five-year term in February.PHOTO: BLOOMBERG

But Lagarde gets no jail time in case linked to misuse of funds when she was finance minister

PARIS • Ms Christine Lagarde, the managing director of the International Monetary Fund (IMF), has been found guilty on criminal charges linked to the misuse of public funds during her time as France's finance minister.

Ms Lagarde, who began her second five-year term at the IMF in February, will not face any jail time, the judge said yesterday.

The scandal has overshadowed her work at the fund, to which she was appointed in 2011 after Mr Dominique Strauss-Kahn resigned as managing director when he was accused of having sexually assaulted a maid in a New York City hotel.

The move is likely to destabilise the IMF as it faces a host of thorny issues, including questions over its participation in a multibillion-dollar bailout for Greece and uncertainty about the United States' role in the organisation once Mr Donald Trump becomes president next month.

The verdict was a surprise, after the prosecutor in the trial said last week that the case against her was "very weak" and did not appear to be enough to win a conviction. It is a theme prosecutors have previously repeated.

The trial against Ms Lagarde was just one facet of the scandal - many people associated with it are under investigation, for accusations as varied as embezzlement and organised fraud.

The trial revived concerns in France about high-level corruption, shining a spotlight on intimate ties between politicians and business people, and on the large sums that are sometimes used to grease the country's political wheels.

The case against Ms Lagarde centred on Mr Bernard Tapie, a former entertainer and owner of Adidas who had previously been jailed on corruption charges.

Mr Tapie accused the lender Credit Lyonnais, in which the French state had a stake at the time, of cheating him when it oversaw the sale of his share in the sportswear empire in 1993. Years of costly legal battles ensued.

In 2007, Ms Lagarde sent the dispute to a three-person private arbitration authority that awarded Mr Tapie more than €400 million in damages and interest, to be paid by the state.

Her critics said that the decision was politically tainted, and she was charged with negligence for allowing the arbitration and for then declining to appeal against the panel's verdict.

The trial against Ms Lagarde was just one facet of the scandal - many people associated with it are under investigation, for accusations as varied as embezzlement and organised fraud.

Legal proceedings are expected to begin next year against Mr Stephane Richard, the chief executive of French telecommunications giant Orange. He is the former chief of staff to Ms Lagarde, who said that she had relied on his judgment to send Mr Tapie's case to arbitration.

Mr Tapie, who was ordered by a French court last year to repay the full amount with interest after a judge invalidated it, is expected to be called to a separate trial. He is under bankruptcy protection and has not repaid the sum.

Separately, a judge on the arbitration panel that heard Mr Tapie's case has been accused of fraud and is expected to be tried, as is Mr Tapie's lawyer.

The IMF board was set to meet shortly to consider the negligence verdict, said a spokesman.

The court's decision to not hand down a sentence will play in Ms Lagarde's favour, according to the Wall Street Journal.

The IMF chief initially faces a maximum penalty of one year in prison and a fine of €15,000 (S$22,650). But given that the court has ruled out jail time, the IMF board could overlook a conviction, the Wall Street Journal reported.

But Britain's Telegraph daily noted there had been speculation that the organisation might force her to resign if she was found guilty, to limit any damage to its reputation.

NYTIMES, REUTERS

A version of this article appeared in the print edition of The Straits Times on December 20, 2016, with the headline 'IMF chief guilty of negligence in surprise verdict'. Print Edition | Subscribe