Inquiry threat may linger for IMF hopeful Lagarde

By Catherine Bremer

PARIS (Reuters) – French judges may seek more time to decide on opening an inquiry into Finance Minister Christine Lagarde’s role in a 2008 arbitration payout, meaning allegations of misconduct could hang over her bid to head the IMF.

Three judges will meet on Friday to discuss whether the case brought against her by opposition deputies merits a formal probe, and a judicial source said they will likely seek extra time before deciding.

“It’s likely there won’t be a decision on Friday,” the source at the Court of Justice of the Republic, a special tribunal qualified to judge ministers, told Reuters.

“The June 10 meeting is a simple working meeting. There could be a decision, but not necessarily. The decision could come any time, it’s not even sure that it will come in June, there is no visibility on the date.”

Lagarde is the favorite to head the International Monetary Fund after her compatriot Dominique Strauss-Kahn quit the post last month to defend himself against a charge of attempted rape.

Having the threat of a legal inquiry hanging over her could prove a hitch to her candidacy, however.

Coincidentally, June 10 is also the deadline for candidates to register for the IMF managing director job. The international lender wants to appoint a new chief by the end of June.

Lagarde, a former high-flying lawyer and one of France’s most influential ministers, has denied any misconduct in her approval of a 285 million euro arbitration payment to Bernard Tapie, a friend of President Nicolas Sarkozy, to settle a long-running dispute between him and a state-owned bank.

She has said the investigation — brought by Socialist Party deputies who accuse her of abuse of authority — will have no bearing on her IMF bid, which is backed by the European Union and several African countries.


On Tuesday, Lagarde told CNBC TV the case was unfounded and any delay to the investigation would not pose a problem for her aspirations to head the IMF.

“It’s a matter which is without grounds, without foundation, this is clearly engineered and instrumented by the opposition at the moment,” she said, adding that top legal experts had already concluded there was “nothing at all” to the case.

“On the 10th of June, what could very well happen, and I’m not worried about it, is that the current panel finds it a little bit too complicated and refers it for further investigation, but that would be part of the process and I would not be worried about it at all,” she said.

The diplomatic Lagarde would turn the page for France and the IMF after the scandal of Strauss-Kahn’s arrest on a charge of attempting to rape a New York hotel maid, but the Fund could be leery of the risk of a legal case opening up in the future.

Lagarde’s main rival for the job is Mexican Central Bank chief Agustin Carstens and there have been signs some emerging market heavyweights resent Europe’s grip on the position.

Paris has said Lagarde is backed by China and the United States, although neither country has confirmed its stance and Lagarde was in Beijing on Wednesday as part of a global tour to drum up support. She will also visit Saudi Arabia and Egypt.

“I am here not to officially ask for China’s backing, but I hope to introduce my bid,” China’s Xinhua agency reported her as saying at the start of her meeting with Chinese Vice Premier Wang Qishan. “China is very important for the IMF.”

Jean-Louis Nadal, the public prosecutor of France’s highest court, recommended earlier this year that the Court of Justice open an inquiry into Lagarde’s role in the payout to Tapie.

A former left-wing government minister who switched sides to support Sarkozy’s 2007 presidential campaign, Tapie was paid to settle his dispute with former state-owned bank Credit Lyonnais, which he had accused of defrauding him during the 1993 sale of his stake in sports giant Adidas.

Lagarde agreed to drop the judicial proceedings and submit the case to a private arbitration panel, overruling some in her ministry who argued that it should remain in court.

Her accusers say she ignored recommendations to check whether the arbitration was legal and to appeal against the size of the award.