Lagarde defiant as trial over Tapie payout begins

IMF head unflustered despite accusation of negligence over state’s €400m arbitration

Christine Lagarde swept into the courtroom on Monday glamorous and suntanned, wearing a glittering brooch and a glittering smile.

The director of the International Monetary Fund is the sixth most powerful woman in the world, according to Forbes magazine. She has taken leave from the International Monetary Fund to stand trial for "misappropriation of public funds resulting from her negligence and committed by a third party, as proscribed in articles 432-16 and 432-17 of the penal code."

Lagarde acted as if she enjoyed the ordeal, smiling while the cameras whirred and clicked a few centimetres from her face, flaunting her nerves of steel. In the unlikely event she is convicted when her trial ends on December 20th, Lagarde risks a year in prison and a €15,000 fine.

The trial asks if cabinet ministers should escape punishment for bad decisions, on the grounds they were too busy, did not know and delegated responsibility. While no one accuses Lagarde of corruption, she appears to have turned a blind eye to the mutual back-scratching and favours that bind businessmen and politicians.

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In 1993, Bernard Tapie, a businessman and former politician who has served time in prison for fixing a football match and holds a conviction for tax fraud, was forced to sell the Adidas sporting goods company.

Tapie claimed the Crédit Lyonnais bank robbed him in the transaction. In 2007, he convinced his friend Nicolas Sarkozy, who had just been elected president, to send his dispute with the bank to private arbitration.

Sarkozy saw Tapie on the morning in July 2007 when the president’s top advisers decided to push for what has since been found to have been a sham arbitration.

Lagarde was then finance minister. On Monday, she claimed she had no knowledge of that meeting. As a former president, Sarkozy enjoys immunity from prosecution.

In October 2007, Lagarde signed off on the arbitration. Three arbiters – one of whom was later proven to have been in cahoots with Tapie’s lawyer – awarded Tapie €403 million in taxpayers’ money. Lagarde did not contest the pay-off.

The decision was last year overturned by the Court of Cassation and Tapie was forced to reimburse the money.

‘Profoundly shocked’

Judge Martine Ract-Madoux, the president of the Court of Justice of the Republic, a special jurisdiction for high-ranking officials, told Lagarde she had the right to remain silent.

“I have no intention of remaining silent,” Lagarde said. “I asked the administrators of the IMF to lift my immunity so I could come and explain myself, that I always acted in the public interest . . . I was profoundly shocked by the shortcuts and conspiracy theories in the act of accusation . . . I was profoundly shocked by the aggressiveness towards me.”

“Don’t start your final plea now,” the judge said.

“I promise I won’t repeat it later. You will hear me out,” Lagarde responded.

The “aggressive” document alluded to by Lagarde notes that “multiple acts of negligence committed by a minister who was experienced [in her previous career as a lawyer] in financial disputes and arbitration procedures cannot be explained, unless it was through a determination to impose choices that had been made in advance.”

Six other people, including Tapie, his lawyer, one of the arbiters and Lagarde’s former cabinet director, Stéphane Richard, now the head of France’s largest telecommunications company, Orange, are to stand trial in ordinary courts for “fraud in an organised group” in the same affair.

Lagarde’s lawyer on Monday argued unsuccessfully that her trial could not take place before the others’, because until or unless they are convicted, the misappropriation of funds has not been proven.

But the appeals court that annulled the 2008 arbitration concluded it was fraudulent.

While judges withdrew to consider the demand, journalists debated inconclusively whether a conviction would force Lagarde to resign from her $450,000 (€423,000) a year job as IMF director.

Lagarde and her former cabinet director have blamed each other for the arbitration. Lagarde on Monday said she did not know that Richard was close to Sarkozy. Richard was in charge of “micro-economics, like companies with state participation,” while she handled macro-economics, the big picture. She was not aware that two civil servants who opposed the arbitration were replaced by officials who supported it.

“The stock markets were falling. I had a dossier this big on the new law on purchasing power,” Lagarde said, gesturing to show a pile of documents a metre high. “The arbitration was not a major issue.”

Lagarde did not read reports from advisers counselling her to reject a private arbitration. “As finance minister, I received between 3,000 and 4,000 reports a year from the treasury alone,” she said.

“I said in my preliminary remarks that I may have been exploited,” Lagarde said. “Was I? Were several of us? I don’t have the answer. I don’t exclude the possibility.”

Lara Marlowe

Lara Marlowe

Lara Marlowe is Paris Correspondent of The Irish Times