IMF’s Lagarde ordered to stand trial in France
The simmering French controversy over a generous government payout to a political supporter came to a boil Thursday with reports that Christine Lagarde, a former finance minister in France and now the head of the International Monetary Fund, will face trial in connection with it.
The charge, according to press reports, is “negligence” in performance of public duties for her role in ordering the arbitration that in 2008 awarded businessman Bernard Tapie a staggering $440 million in compensation for what he claimed was fraud by the state-owned bank, Crédit Lyonnais, in arranging the 1993 sale of his majority stake in Adidas.
The award has remained controversial because Tapie was a major supporter of Nicolas Sarkozy in the 2007 election that made him president, and many saw Lagarde’s intervention as politically motivated.
The charge implicating one of the most powerful women in the world comes at a critical juncture for the IMF, which is embroiled in a number of global crises ranging from the existential threat to Ukraine after Russia’s incursion to the future of the euro in the wake of the Greek bailout.
The news Thursday came as a surprise because the top French prosecutor in September recommended that the investigation into Lagarde be dropped.
Lagarde, who has consistently maintained that her handling of the Tapie case involved no wrongdoing, issued a statement Thursday “that she acted in the best interest of the French state and in full compliance with the law,” while her lawyer said the move by the special tribunal that handles offenses by top government officials to proceed with a trial was “incomprehensible.”
Lagarde said she would appeal the decision to hold a trial and the IMF executive board issued a statement “to express its confidence in the managing director’s ability to effectively carry out her duties.”
The Tapie case has been looming over Lagarde like a sword of Damocles since she was named in 2011 to replace the disgraced Dominique Strauss-Kahn, who stepped down from the IMF post in the wake of allegations of sexual assault, which later were dismissed.
Her conduct as IMF chief has been controversial because of extraordinary lending taken by the agency at her direction in both the Ukraine and Greek bailouts – international actions that directly benefited European business and banks – and most recently for pushing to include the Chinese currency as a reserve currency even though it does not fulfill the condition of being “freely usable.”
With her term expiring next year, the question has been whether she would be reappointed, or if the IMF would finally yield to pressure to abandon the postwar tradition of having a European head the agency.
The French have been particu- larly proprietary in claiming the prestigious IMF post, with French nationals holding it for 40 of 69 years the job has existed.
Strauss-Kahn considered the IMF post a springboard to what was to be his bid for the French presidency in 2012. Lagarde reportedly has been entertaining notions of running for president herself in 2017.
The latest move by French authorities comes after a French court earlier this month rejected Tapie’s claims for even further compensation for the Adidas sale and ordered him to pay back the original award with interest.
The decision to put Lagarde on trial would seem to indicate that French judicial authorities do not have a favorable view of that 2008 arbitration procedure to compensate Tapie.
Lagarde, as the current French finance minister, Michel Sapin, reminded reporters in New York on Thursday, is “innocent until proven guilty,” so there should be no obstacle to her carrying out her duties for the IMF.
Perhaps, but the new French charge injects a good deal of uncertainty into Lagarde’s future at the IMF.