IMF chief may avoid jail

Accusations of negligence as minister are ‘without merit’, says lawyer.

Christine Lagarde may avoid jail time and keep her job as head of the International Monetary Fund after she was ordered to stand trial in France on charges that carry a potential prison term.

Lagarde, 60, yesterday lost a bid to challenge a December decision to be tried for alleged negligence during her time as French finance minister that paved the way for a massive government payout to a French tycoon.

The specialised panel that will hear Lagarde’s case has previously found ministers guilty without having them actually serve time in prison.

The panel’s record and Lagarde’s strong support from IMF member nations amid the long-running case mean there’s little chance that it will amount to more than a distraction from her role leading the world’s lender of last resort. No date has been set yet for the trial, which is expected to last about a week.

‘‘I don’t think anybody really feels that this is a matter that undermines her effectiveness,’’ said Edwin Truman, a former United States Treasury official who is now a senior fellow at the Peterson Institute for International Economics in Washington. If Lagarde received a suspended jail sentence, ‘‘she would just carry on’’, he said.

Lagarde is accused of failing to block an arbitration process in 2008 that ended a long-running dispute between former stateowned bank Credit Lyonnais and Bernard Tapie, a businessman and supporter of then-French president Nicolas Sarkozy. Tapie walked away with an initial award of about €285 million before it was cut to zero by an appeals court.

The charge of negligence in the use of public funds carries a maximum penalty of a year in prison and a fine of €15,000.

‘‘I am convinced that the court will find the allegations of negligence to be without merit,’’ Lagarde’s lawyer Patrick Maisonneuve said.

While a jail sentence could not be ruled out, it was more likely that Lagarde would get a symbolic fine if convicted, said Christopher Mesnooh, a Paris-based lawyer at Fieldfisher LLP.

Six ministers have stood trial before the Cour de Justice, including current Environment and Energy Minister Segolene Royal in a defamation case, and Laurent Fabius in relation to the distribution of contaminated blood when he was prime minister. Both were cleared.

Presidential and parliamentary elections in France scheduled for May and June, respectively, could also affect the timing of Lagarde’s trial.

Since Sarkozy may run for president next year, ‘‘this has all sorts of interesting political connotations’’, said Mesnooh.

‘‘If she’s exonerated, that’s one less legal issue Sarkozy has to worry about,’’ he said.

‘‘If, for whatever reason, she’s found guilty, then it will be something else that his opponents will use against him.’’

While the threat of a trial has clouded Lagarde’s time at the IMF, its member nations gave her clear backing for a second five-year term as managing director in February. There were no challengers.

Lagarde’s terms of appointment from 2011 say she must avoid ‘‘even the appearance of impropriety’’. The IMF’s executive board can dismiss her at any time.

The IMF board yesterday expressed confidence in Lagarde’s ‘‘ability to effectively carry out her duties’’, Gerry Rice, the fund’s chief spokesman, said.