IMF chief Lagarde to stand trial over role in €400m Tapie payout

A French court has ordered Christine Lagarde, the head of the International Monetary Fund, to stand trial over her role in a disputed €400 million payout made to businessman Bernard Tapie in 2008.

Ms Lagarde, who was French finance minister at the time, has denied wrongdoing in the affair that entangled several members of the cabinet of former president Nicolas Sarkozy.

She appeared to have been successful in September when prosecutors said the case against her should be dropped.

But France’s Cour de Justice de la République, a tribunal set up to try ministers, has said she will stand trial over the affair.

Misuse of funds

Ms Lagarde is accused of negligence in public office in relation to misuse of public funds, an offence that carries a maximum sentence of one year in prison and a fine of up to €15,000.

The decision to put the IMF chief on trial is the latest twist in the 22-year legal saga. It concerns more than €400 million paid to Mr Tapie by the French government in 2008 in compensation after he claimed he was defrauded by Crédit Lyonnais, then a state-owned bank, into selling his stake in sports equipment company Adidas for lower than it was worth in 1993.

The French state had long fought the claim, but abruptly changed tack and ordered an arbitration. Critics claimed the pay-out – approved by Ms Lagarde – was rigged to reward Mr Tapie, a former socialist, for backing Mr Sarkozy’s election campaign.

Earlier this month, however, the appeal court ruled Mr Tapie had to pay back the money he received from the French state. He had been arguing the payout should have been higher.

Ms Lagarde’s office said she “would like to reaffirm that she acted in the best interest of the French state and in full compliance with the law”.

IMF spokesman Gerry Rice said its executive board “continues to express its confidence in the managing director’s ability to effectively carry out her duties”.

Andrea Montanino, a former executive director at the IMF who is now at the Atlantic Council think tank, said the decision was likely to trigger at least an informal meeting of the IMF board to review Ms Lagarde’s legal position.

Travel ban

Among the questions the board would have to consider was whether the decision – and any trial – would impede Ms Lagarde’s ability to travel and do her job, Mr Montanino said. Were the French judiciary to impose a travel ban or if she were forced to spend months in a courtroom, the board might ask her to step aside, even temporarily.

Ms Lagarde’s lawyer, Yves Repiquet, said he would be recommending an appeal. “It’s incomprehensible,” he said. “I will recommend Lagarde appeal this decision.”

Ms Lagarde has been managing director of the IMF since 2011, when she was appointed to replace disgraced compatriot Dominique Strauss-Kahn, who was forced to step down amid a sex scandal. Her current five-year term expires in July next year and, although she has been coy about her intentions, she is widely expected to remain for a second term. – Copyright The Financial Times Limited 2015