IMF chief Lagarde found guilty over tycoon payout
Board meets to discuss fallout of guilty verdict against Lagarde
A French court yesterday found IMF head Christine Lagarde guilty of negligence over a massive state payout to a tycoon when she was French finance minister but spared her a fine or prison sentence. The Court of Justice of the Republic found against Lagarde over her handling of a dispute between the state and flamboyant businessman Bernard Tapie, which ended in a 404-million-euro ($422 million) award for Tapie.
The IMF was expected to meet shortly to discuss the implications of the guilty verdict against IMF chief Christine Lagarde in a French court, a spokesman for the organization said yesterday. “The Executive Board has met on previous occasions to consider developments related to the legal proceedings in France. It is expected that the Board will meet again shortly to consider the most recent developments,” fund spokesman Gerry Rice said in a statement. Lagarde was put on trial over her 2007 decision to allow a dispute over sale of the Adidas sports brand to the state-owned Credit Lyonnais bank to be resolved by a private arbitration panel, and then failing to challenge the result. The court cleared her of negligence over her decision to refer the matter to arbitration but upheld the charge over her failure to contest the award.
The first woman to head the IMF, Lagarde presided over some of the worst of the fallout from the 2008 financial crisis and is in her second term as managing director after she was reappointed in February. If the board decides she must leave, it will create a race to search for a replacement, who according to an agreement should come from a developing nation.
In a blow to her otherwise stellar career, the court rapped Lagarde for failing to contest the massive payment. Crucially, however, the Paris court said exempted her from any penalty. It was not clear what impact the finding will have on her position at the International Monetary Fund, which has so far given Lagarde its full backing. The IMF board was to meet in Washington in the wake of the court’s decision. The 60-year-old former corporate lawyer, who was the first ever female finance minister of a Group of Eight country before becoming IMF chief in 2011, was not in court for the ruling. Her lawyer Patrick Maisonneuve told reporters she was in Washington. Maisonneuve welcomed the absence of a punishment but said he “would have preferred that she be simply cleared”. Lagarde was put on trial over her 2007 decision to allow the dispute over Tapie’s sale of the Adidas sports brand to the state-owned Credit Lyonnais bank to be resolved by a private arbitration panel, and then failing to challenge the result. The court cleared her of negligence over her decision to refer the matter to arbitration but upheld the charge over her failure to contest the award.
Lagarde told the court last week she had acted in good faith and that her sole aim had been “to defend the general interest”. The Court of Justice of the Republic, which is staffed by judges and members of parliament, hears cases against ministers accused of wrongdoing in office. The punishment for negligence theoretically carries a one-year prison sentence and a 15,000-euro fine.
Strain on family
Lagarde’s voice cracked with emotion on Friday as she said the trial had put her family she is the mother of two sons-through a “testing” time. Prosecutor Jean-Claude Marin had said he believed the evidence was “very weak” and was opposed to convicting Lagarde. The payout to Tapie raised eyebrows, given his vocal support for Lagarde’s then boss, ex-president Nicolas Sarkozy.
It was subsequently cancelled by the courts. Tapie sold Adidas to Credit Lyonnais for the equivalent of 315.5 million euros in 1993. The bank sold it on the following year for 701 million euros, prompting claims from Tapie that he had been cheated.
Lagarde told her trial she had trusted the advice of her subordinates in the process. Another of her lawyers, Bernard Grelon, said her fault was “not one of negligence. It is having taken a decision which turned out badly”. As IMF chief, Lagarde has been a key player in bailout negotiations for Greece and has also worked to reform the US- and Europe-dominated institution to reflect China’s growing global leverage.
Lagarde succeeded her disgraced compatriot Dominique Strauss-Kahn as IMF managing director after he resigned to fight sexual assault charges.
Another former IMF head, Rodrigo Rato of Spain, is currently standing trial on charges of misusing funds when he was head of Spanish lender Bankia.
There is a longstanding agreement among the advanced economies after World War II that the head of the IMF is always a European five of the 11 have been from France-while the leader of the World Bank is always an American.
However, in the early 2000s there was a move to increase representation in the socalled Bretton Woods institutions, especially the IMF, to give less weight to small European economies, and to select a leader from among the large emerging market economies like Mexico and the so-called BRICs countries Brazil, Russia, India and China. — AFP
PARIS: Patrick Maisonneuve (centre), lawyer of International Monetary Fund head Christine Lagarde (inset), speaks to journalists yesterday at the Court of Justice of the Republic in Paris following the decision in his client’s trial for negligence over a massive state payout to a tycoon when she was French finance minister.