IMF chief Lagarde to stand trial for negligence

If tried and convicted, Ms Lagarde risks being jailed for up to a year and fined €15,000 (S$22,424).
If tried and convicted, Ms Lagarde risks being jailed for up to a year and fined €15,000 (S$22,424).PHOTO: REUTERS

She will face French tribunal over handling of dispute when she was economy minister

PARIS • International Monetary Fund (IMF) chief Christine Lagarde has been ordered to stand trial in France over a massive state payout to a controversial tycoon when she was French economy minister, dealing a setback to her stellar career.

France's highest appeals court yesterday dismissed Ms Lagarde's challenge against the decision to try her for negligence in her handling of a dispute between a state-owned bank and businessman Bernard Tapie.

The ruling means the 60-year-old will go before a special tribunal that hears cases against government ministers accused of wrongdoing in the discharge of their duties.

It is a blow to the IMF managing director, who just began her second five-year term and insists she acted in France's best interests.

If tried and convicted, Ms Lagarde risks being jailed for up to a year and fined €15,000 (S$22,424).

The IMF expressed firm backing for Ms Lagarde yesterday. "The executive board has been briefed on recent developments related to this matter, and continues to express its confidence in the managing director's ability to effectively carry out her duties," said IMF spokesman Gerry Rice. He added in an e-mailed statement that it "would not be appropriate" for the IMF to comment on the case.

Ms Lagarde was placed under formal investigation in 2014 over her handling of a long-running dispute with Mr Tapie, 73, who claimed he was defrauded by Credit Lyonnais in its handling of his sale of Adidas in the 1990s.

The case against Ms Largarde stems from her decision to allow the row to be settled by arbitration instead of the courts, which would likely have resulted in a much smaller bill for the state. Prosecutors have also questioned her failure to challenge the massive award.

Mr Tapie walked away with a staggering €404 million in compensation. A court has since found the arbitration to be fraudulent because one of the arbitrators had links to Mr Tapie.

Ms Lagarde has denied any wrongdoing or that she acted on orders from then President Nicolas Sarkozy, of whom Mr Tapie was a supporter. In an interview in Washington earlier this month, she insisted she had a "clear conscience".

"I've always acted in accordance with the law, and I've always had in mind the public interest," she said. "It was not my duty to select the arbitration panel, to investigate their past and history, and I had no reason to doubt their probity and honesty."

Investigating magistrates, however, found evidence of "serious negligence on the part of a minister tasked with conducting affairs of state" and, in December, ordered the case to go to trial.

Ms Lagarde will be the third successive head of the Washington-based lender to face trial.

Her predecessor, compatriot Dominique Strauss-Kahn, was acquitted of pimping by a French court last year, four years after he resigned from his IMF post to fight sexual assault allegations.

Spain's former IMF chief Rodrigo Rato has also been ordered to stand trial for misusing funds when he was head of Spanish lender Bankia.


A version of this article appeared in the print edition of The Straits Times on July 23, 2016, with the headline 'IMF chief Lagarde to stand trial for negligence'. Print Edition | Subscribe