IMF chief grilled for second day over French payout scandal

PARIS (AFP) - IMF chief Christine Lagarde's future was at stake Friday as French prosecutors grilled her for a second day to decide if she should be charged over a state payout to a disgraced tycoon when she was finance minister.

Ms Lagarde was questioned for 12 hours on Thursday over her 2007 handling of a row that resulted in 400 million euros (S$644 million) being paid to controversial business figure Bernard Tapie.

Ms Lagarde has downplayed the investigation, but the stakes are high for both her and the International Monetary Fund, which has expressed confidence in its first woman leader.

She could eventually be named an assisted witness, whose status falls between that of simple witness and formal investigation and implies there is some evidence against the person questioned, or placed under investigation - the closest equivalent in French law to being charged.

But she would not be automatically forced to resign from the IMF if she is charged.

The chic Ms Lagarde, considered one of the world's most powerful women, won respect as France's first female finance minister for her no-nonsense style, intellect and style.

She greeted journalists but did not make any statements upon her arrival at the courthouse on Friday.

Criminal charges against Ms 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.

The IMF reiterated its support on Thursday, with a spokesman saying: "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."

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

Prosecutors working for the Court of Justice of the Republic (CJR), which probes cases of ministerial misconduct, suspect he received favourable treatment in return for supporting Nicolas Sarkozy in the 2007 presidential election.

They have suggested Ms 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.

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.

Mr 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 Mr Tapie received enabled him to clear his huge debts and tax liabilities and, according to media reports, left him with 20 million to 40 million euros which he has used to relaunch his business career.

Mr Tapie, who recently purchased a newspaper group in the south of France, and has acquired a luxury yacht, a Bombardier jet and several top properties in the south of France and Paris, said in an interview on Friday that he had "less than 100 million euros" from the payout if one deducted the taxes he paid and what he owed his creditors.

"About the sum, I can affirm...that Christine Lagarde had saved the state several billion euros by opting for arbitrage," he told Le Parisien newspaper.

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

Join ST's Telegram channel and get the latest breaking news delivered to you.