Lagarde's IMF post hangs in balance

Lagarde's IMF post hangs in balance
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Two French heads of the IMF in a row in legal scandals of different kinds begins to reflect embarrassingly on their country of origin. Christine Lagarde, when she was shortlisted for the job after Dominique Strauss-Kahn resigned in disgrace, did mention there was a risk of her past career resurfacing, but she got the post anyway.

She still has the French and IMF authorities’ trust, they say, even as a 20-year-old case catches up with her. Prosecutors have suggested that Lagarde — who at the time headed the finance ministry — was partly responsible for irregularities which could lead to charges of mis-use of public funds.

In 1993, businessman Bernard Tapie entered government but had to resign when he was convicted for match-fixing as president of the main Marseilles football club and sent to prison. After his sale of sports group Adidas that year, through the Credit Lyonnais bank, Tapie accused the partly state-owned institution of defrauding him by intentionally undervaluing Adidas at the time of the sale and argued that the state should compensate him.

The Lagarde investigation centres on her 2007 move to ask a panel of judges to arbitrate in the Tapie dispute with Credit Lyonnais, which, in the meantime, had collapsed. Tapie’s arguments were upheld by the arbitration panel, he was paid millions of euros out of state coffers, he cleared his huge debts and went back into business.

In return for Tapie supporting Nicolas Sarkozy in the 2007 presidential election, prosecutors working for the French national court of justice suspect he received favourable treatment.

Among the prickly questions being asked are why the regular public justice system didn’t handle Tapie’s claim, since public money was at stake, whether the arbitrators who were chosen were friends of his and what Lagarde knew. She didn’t take action when the panel made its controversial ruling, although she could have. Lagarde’s court appearance comes a day after the first woman to run an organisation considered the pillar of the international financial system was named the world’s seventh most powerful woman by Forbes magazine.

She has repeatedly said the probe into the Tapie case has never interfered with her IMF duties, but if the court decided to prosecute, she and the IMF could be forced to reassess. Nothing in her contract says she would have to resign, but it does say she must “strive to avoid even the appearance of impropriety.”

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