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Court orders inquiry of new IMF chief

Associated Press / August 5, 2011

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PARIS - A French court ordered an investigation yesterday into new IMF chief Christine Lagarde’s role in a $400 million arbitration deal in favor of a controversial tycoon.

Investigators will open an inquiry this week into possible charges of “complicity to embezzlement of public funds’’ and “complicity to forgery,’’ prosecutors said.

Lagarde was France’s finance minister when magnate Bernard Tapie won a 2008 settlement with a French state-owned bank over the mishandled sale of sportswear maker Adidas in the 1990s. Critics viewed the settlement as an overly generous chunk of taxpayer money handed to a brash businessman.

The investigation comes as Lagarde is working to improve the reputation of the Washington-based International Monetary Fund after her predecessor, Dominique Strauss-Kahn, quit to face charges that he tried to rape a New York hotel maid. He denies the charges.

A commission at France’s Court of Justice of the Republic - which convenes rarely and exclusively to handle cases involving government ministers - decided that an investigation should be launched into Lagarde’s role in the arbitration deal.

The investigation is likely to take months and may not result in a trial - but if it does, and if Lagarde should be convicted, she could face up to 10 years in prison. Lagarde can only be questioned by prosecutors if preliminary charges will eventually be filed against her.

The inquiry was prompted by a request from a senior prosecutor in May, who said he suspected Lagarde overstepped her authority in allowing the arbitration to go forward.

Lagarde’s lawyer, Yves Repiquet, said his client welcomes the investigation. “We’ll get to the bottom of things. There will no longer be the least doubt,’’ he said.

Critics have said that the Adidas case should not have gone to a private arbitration authority in the first place because it involved a state-owned bank, Credit Lyonnais, and that Lagarde should have questioned the independence of one of the arbitration panel’s judges.

The head of the Socialist opposition in the French Parliament, Jean-Marc Ayrault, welcomed the decision. He said it “confirms the existence of anomalies and irregularities in the handling of this case.’’

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