THE HEAD of the International Monetary Fund (IMF), Dominique Strauss-Kahn, yesterday publicly apologised for "an error of judgment" in an affair with a subordinate but denied he abused his position.
In a memo e-mailed to staff after meeting the fund's board, Mr Strauss-Kahn apologised to IMF employees, the woman with whom he had the affair, Piroska Nagy, and his wife for the trouble it had caused.
The fate of Mr Strauss-Kahn, a former French finance minister and currently the most popular socialist politician in France, will be decided by the IMF's board by the end of the month.
The board will base their decision on an investigation by Washington law firm Morgan, Lewis Bockius into Mr Strauss-Kahn's brief affair last winter with Ms Nagy, a Hungarian-born economist who was employed by the IMF's Africa division. Ms Nagy's husband, the former president of the Argentine central bank, Mario Blejer, discovered the affair by reading his wife's e-mails.
She volunteered for a severance programme for almost 400 IMF employees last summer and has since joined the European Bank for Reconstruction and Development in London.
The scandal comes as the IMF is dealing with the worst financial crisis since the 1930s and emerging economists turn to it for advice and financing.
It also follows the resignation of World Bank president Paul Wolfowitz, who was forced to step down 16 months ago amid a staff uproar over a high-paying promotion he authorised for his companion, who worked at the bank.
"I apologised and said that I very much regret this incident," Mr Strauss-Kahn said in the staff e-mail. "Second, while this incident constituted an error of judgment on my part, for which I take full responsibility, I firmly believe that I have not abused my position," he said, adding: "Third, I fully support the process that is under way and I will, of course, follow the board's guidance as to how best to resolve this matter."
Mr Strauss-Kahn and Ms Nagy began exchanging e-mails late last year, and consummated their relationship during a conference in Europe in January last.
The IMF's code of conduct says employees "must avoid the very appearance of inappropriate behaviour". But Mr Strauss-Kahn will not be fired for having had an affair with an employee. In question is whether Ms Nagy received preferential treatment - or on the contrary was forced to leave her job - because of her involvement with Mr Strauss-Kahn.
Mr Strauss-Kahn's defence was summarised by one of his lawyers, Elizabeth Taylor, at the Zuckerman Spaeder firm, in an interview with the Financial Times: "Mr Strauss-Kahn played no role in determining [Ms Nagy's] severance package and is confident that she received no special treatment, favourable or unfavourable, and that the terms were the same as those available to others of her grade and seniority. She was not pressured to leave."
The case is seen here as representative of different attitudes towards marital infidelity in the US and France. "Within [the IMF], people are emphasising that, in sexual matters, European standards differ from the American code of conduct, and that the IMF is an international agency," Libérationnewspaper noted.
Anne Sinclair, Mr Strauss-Kahn's wife of 17 years, defended her husband in a blog published on the internet. "Everyone knows these things can happen to any couple," Ms Sinclair wrote. "For me, this one-night stand is already behind us; we've turned the page."
Ms Sinclair is a former television celebrity from a wealthy family. She is Mr Strauss-Kahn's third wife.
No one in the French political class has criticised Mr Strauss-Kahn.
Mr Strauss-Kahn is sometimes called "the left-wing Sarkozy". If he is cleared of impropriety by the IMF, he may return to France to challenge president Nicolas Sarkozy in 2012. Mr Sarkozy created a sensation by supporting Mr Strauss-Kahn for the IMF job last year, citing his credibility, experience and fluency in five languages.
As finance minister from 1997 until 1999, Mr Strauss-Kahn led massive privatisations, in particular France Télécom. He was forced to resign when he was implicated in several financial scandals, but was cleared of wrongdoing two years later.
Mr Strauss-Kahn campaigned in favour of the European constitutional treaty in 2005, but lost the socialist party nomination for the French presidential race to Ségolène Royal the following year.
Several French commentators implied there was a conspiracy to prevent a European socialist playing an influential role in the future regulation of financial markets. The Wall Street Journalrevealed Mr Strauss-Kahn's affair on the day Mr Sarkozy arrived in the US to persuade US president George W Bush to agree to an international summit to "refound capitalism". - ( Additional reporting: Reuters)
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