IMF Chief In Paris Court To Testify In Power Abuse Scandal

5/23/2013 6:58 AM ET

IMF Managing Director Christine Lagarde was summoned to a court in Paris on Thursday for questioning in connection with an investigation into a controversial arbitration settlement, while she was the country’s Finance Minister.

Last month, the Court of Justice of the Republic (CJR), a special court established to try cases of ministerial misconduct, had summoned the 57-year-old IMF chief to testify in the case, which dates back to her tenure as a Cabinet Minister in the previous government of President Nicolas Sarkozy.

Incidentally, French police had raided Lagarde’s Paris apartment in March as part of an investigation into allegations that she misused her powers to help a businessman who supported Sarkozy’s election campaign in 2007.

Lagarde is accused of wrongly awarding an EUR 285 million ($407 million) arbitration payout to Bernard Tapie in 2007 while she was the Finance Minister. Notably, Tapie, a French investor and a former Left-wing Minister, had switched sides in 2007 to support Sarkozy’s presidential election campaign.

It is alleged that Lagarde wrongly pressed Credit Lyonnais bank to settle an arbitration claim made by Tapie that the bank had defrauded him of millions of dollars in the purchase of his stake in the German sportswear company, Adidas.

As a final settlement, the arbitration court in 2008 awarded Tapie 45 million euros ($64 million) in damages in addition to 240 million euros for his creditors as well as nearly 100 million euros in interest.

Lagarde had refused to appeal that decision on the grounds that majority of that money would ultimately return to the State by means of creditor’s claims. Lagarde, who is not accused of having personally profited in any way, has denied any wrong doing in the case.

The ongoing probe focuses on her alleged complicity in the misuse of public funds and fraud in what has been dubbed by French media as the “Tapie affair.” It is now up to the CJR to decide whether Lagarde should be charged for making the arbitration payout to Tapie to settle the long-running court battle, ignoring objections from senior advisers.

Incidentally, Lagarde was elected as IMF Managing Director after her predecessor and fellow-Frenchman Dominique Strauss-Kahn resigned from the post following his arrest in New York in May 2011 on charges of attempting to sexually assault a hotel maid.

by RTT Staff Writer

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