IMF chief found guilty of neg­li­gence in ’08 case, spared jail sen­tence.

Spared puni­tive sen­tence, but rep­u­ta­tion tar­nished

The Washington Times Daily - - FRONT PAGE - BY JOHN LE­ICES­TER

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.

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