In what may make her the second French occupant being forced to resign the plum job in barely five years, Christine Lagarde, Managing director of the International Monetary Fund (IMF), risks up to a year in jail and a €15,000 ($16,000) fine, if convicted of negligence for her role in a huge state payout to a French tycoon in 2008, when she was France’s finance minister.
Lagarde replaced Dominique Strauss-Kahn, a French citizen, forced to resign amid allegations of sexual assault in 2011, which shook the credibility of the Washington based global powerhouse.
She is being tried for her role in a 2008 arbitration ruling that handed €403 million ($425 million) to Bernard Tapie, a French business magnate and ally of then president Nicolas Sarkozy.
Tapie, a flamboyant tycoon and former TV star, had sued French bank Credit Lyonnais for its handling of the sale of his majority stake in sportswear company Adidas in the mid-1990s.
When Lagarde became finance minister in 2007, the lengthy legal battle between Tapie and the bank remained unresolved, and she ordered it to be settled through an unusual private arbitration panel, instead of regular courts.
The this, it was noted at the time, was against the advice of her own staff.
Indeed, the choice of arbitration proved disastrous for the state, as it led to the massive payout to Tapie from public funds, prompting indignation in France.
International news agencies quote Lagarde, 60, as denying any wrongdoing in the case which began in July 2011, with the judge expected to rule on December 20.
Strauss-Kahn’s woes were allegedly linked to his interest in the French presidency.
The IMF’s board has so far supported Lagarde at all stages of the French legal proceedings, which began the month after her appointment in July 2011. It reiterated its support and confidence last week.
In an interview with France 2 television on Sunday, Lagarde was reported as expressing confidence that she had done nothing wrong.
“Negligence is a non-intentional offence. I think we are all a bit negligent sometimes in our life. I have done my job as well as I could, within the limits of what I knew,” she was quoted as saying
But not everyone agrees with her.
Investigating judges, for example, say Lagarde committed a string of serious errors when she made the arbitration choice and also, later on, when she refused to challenge the deal, suggesting she may have been influenced by the political connections between Tapie and Sarkozy, according to court documents.
“Ms. Lagarde’s behavior proceeds not only from a questionable carelessness and precipitation, but also from a conjunction of faults which, by their nature, number and seriousness, exceed the level of mere negligence,” the judges wrote at the end of their investigation.
Soon after the arbitration deal was notified, investigators suspected that the whole process was rigged in favor of the businessman.
In 2013, Tapie, his lawyer, one of the arbitrators and Lagarde’s chief of staff at the ministry, Stéphane Richard, now the CEO of the telecom company Orange, were charged with gang-related fraud, and Lagarde’s Paris home was searched by police.
Tapie later got another charge of misappropriation of funds. In 2015, a court quashed the arbitration deal, and then ordered Tapie to pay the money back. Last June, the top French court ruled the arbitration was fraudulent.
On Monday, Lagarde was due to appear before a panel of 15 judges In the Court of Justice of the Republic, a special body that tries government ministers for alleged wrongdoing while in office.
The panel comprises 12 lawmakers from majority and opposition parties, who will go over notes between Lagarde and her staff to verify her claims that she was not aware of some key details at the time of her decision.