IMF chief found guilty of negligence in ’08 case, spared jail sentence.
Spared punitive sentence, but reputation tarnished
PARIS | The International Monetary Fund’s managing director was convicted Monday of negligence by a special French court for her role in a contentious and generous arbitration award in 2008 to a politically connected tycoon.
But Christine Lagarde, who was France’s finance minister at the time, was spared jail time and a criminal record. She had risked a year of imprisonment and a fine.
The guilty verdict, even without punishment, tarnishes Ms. Lagarde’s status as one of the most powerful women in world finance. It raised immediate doubts about whether the IMF’s first female managing director will be able to continue in that job she has held since 2011.
But the IMF executive board, in a statement late Monday, gave a strong signal Ms. Lagarde would survive, saying it had met to discuss the verdict and reaffirmed “its full confidence in the managing director’s ability to continue to effectively carry out her duties.”
The board statement said directors had taken “all relevant factors into account in its discussions, including the managing director’s outstanding leadership of the Fund and the wide respect and trust for her leadership globally.”
The case revolves around a $425 million arbitration deal given to tycoon Bernard Tapie in 2008 over the botched sale of sportswear maker Adidas in the 1990s. The large amount prompted indignation in France.
Civil courts have since quashed the unusually generous award, declared the arbitration process and deal fraudulent and ordered Mr. Tapie to pay the money back.
In deciding not to sentence Ms. Lagarde, the court noted that the award to Mr. Tapie has since been annulled, sparing damage to the public purse. It also noted by way of explaining the lack of a sentence that Ms. Lagarde was caught up at the time in the storm of financial crisis that engulfed the global economy.
The court also said Ms. Lagarde’s “personality and national and international reputation” counted in her favor.
The Court of Justice of the Republic, made up of three judges and 12 parliamentarians, tries cases concerning ministers for suspected crimes while in office.
Ms. Lagarde, not present for the verdict, maintained her innocence through the weeklong trial. The prosecutor had asked for an acquittal in the case, which began in 2011.
Christopher Baker, one of Ms. Lagarde’s attorneys, wouldn’t speculate on any potential effect of the verdict on his client’s high-profile international career. A lawyer herself, Ms. Lagarde served as French finance minister from 2007 to 2011, when she took her job as head of the IMF.
“There is no sentence, which means there’s no record of this,” he said. “The result of this last five years is nothing, which leaves us in kind of a complicated and strange situation.”
The special court acquitted Ms. Lagarde of negligence in her original decision to put the Tapie case to arbitration. But it found her guilty in a subsequent decision not to contest the amount of the arbitration award.
The court’s presiding judge, in reading the verdict, said Ms. Lagarde should have asked her aides and others for more information about the “shocking arbitration award” that included a tax-free payment of nearly $47 million in damages to Mr. Tapie, which the court described as fraudulent.
Investigating judges said Ms. Lagarde committed a series of serious errors in the award to Mr. Tapie.
The amount — awarded to end years of legal wrangling with Mr. Tapie over the sale in the 1990s of his majority stake in sportswear giant Adidas — prompted indignation in France. It also raised questions about whether Mr. Tapie benefited from his political connections, including with then-President Nicolas Sarkozy, Ms. Lagarde’s boss when she was his finance minister.
The IMF’s board supported Ms. Lagarde throughout the French legal proceedings against her. They began the month after her appointment in July 2011. She took over at the global finance body from another French IMF chief, Dominique Strauss-Kahn, who resigned the post amid sexual assault accusations.
Edwin Truman, a former U.S. Treasury and Federal Reserve international official, told the Reuters news agency that the IMF board was unlikely to force Ms. Lagarde to leave after having stood by her throughout the legal battle.
International Monetary Fund chief Christine Lagarde was spared jail time and a criminal record, but a guilty verdict on negligence in an arbitration award tarnishes her status as one of the most powerful women in finance.