Lagarde allegation awakens ghosts of IMF scandals past

By Jeremy Tordjman ,AFP

WASHINGTON — The International Monetary Fund (IMF) is again touched by scandal with Chief Christine Lagarde’s being charged in a French graft case, three years after predecessor Dominique Strauss-Kahn resigned in disgrace. The “negligence” charge against Lagarde Wednesday in a case dating back to her years as French finance minister bear little resemblance to the sexual-assault allegations from a hotel maid that led to the downfall of Strauss-Kahn in 2011. But Lagarde’s legal challenge in the long-running Tapie affair could weaken the IMF, already under heavy criticism for forcing austerity measures on weak European economies. Since the beginning of the French probe, the IMF executive board has stood behind the managing director, expressing confidence in her ability to meet her responsibilities. Until now, French investigating judges had placed Lagarde under a special witness status that required her to return for questioning when asked. But Lagarde announced Wednesday, in an exclusive interview with AFP, that she has been put under formal investigation for negligence after being again grilled by a special Paris court that probes ministerial misconduct. In France, being placed under formal investigation is the nearest equivalent to being charged, and occurs when an examining magistrate decides there is a case to be answered. Lagarde told AFP that the court decision was “totally without merit” and she did not intend to resign from the Washington-based IMF. The Tapie case relates to a 400-million-euro (US$527-million) state payout to French tycoon Bernard Tapie in 2008. Lagarde referred the dispute between Tapie and partly state-owned bank Credit Lyonnais to an arbitration panel that ruled in favor of the businessman and ordered the payout.

Investigating judges are seeking to determine whether the arbitration was a sham organized to reward Tapie for his support of then-president Nicolas Sarkozy. “After three years of procedure the only surviving allegation is that through inattention I may have failed to block the arbitration that put an end to the long-standing Tapie litigation,” Lagarde told AFP.