Lagarde: ‘Totally unfounded’
Paris, Aug. 27: Christine Lagarde, the head of the IMF, said today that French prosecutors had placed her under formal investigation over a murky business affair that dates to her time as finance minister under former President Nicolas Sarkozy.
Lagarde said in a statement through her lawyer that she was being investigated for “simple negligence”, by the Court of Justice of the Republic, the judicial body that is charged with investigating the conduct of high government officials.
Lagarde, who has denied wrongdoing from the start, said in a statement that the decision by a judicial committee to place her under formal investigation was “totally unfounded” and that she would be returning to work in Washington this afternoon.
She made the announcement a day after she was questioned for a fourth time in the investigation of her role in 2008 during an arbitration proceeding between the government and Bernard Tapie, a one-time cabinet minister and the former owner of the Adidas sportswear empire.
Prosecutors had assigned Lagarde the status of “assisted witness” in the case. Placing her under formal investigation signals that prosecutors believe they have evidence of wrongdoing, but the charge of negligence hardly suggests high crimes.
Negligence by a government official that makes possible the misappropriation or embezzlement of public funds is punishable with a maximum fine of 15,000 euros, or $19,800, and up to one year in prison.
“After three years of investigation and dozens of hours of interrogation, the committee concluded that I had not been guilty of any infraction,” Lagarde said in the statement, “so it was reduced to claiming that I had been insufficiently vigilant during the arbitration”.
In the French legal system, a formal investigation suggests prosecutors believe they have enough of a case that they may ultimately bring criminal charges and trial. The reality is that many such investigations drag on for years with no charges being filed before being dropped.
Since its creation in 1944, the top IMF official has been a European, with the job alternating among western European nations. Lagarde took over as managing director of the IMF in 2011 after her French predecessor, Dominique Strauss-Kahn, left in disgrace amid charges — later dropped — that he had sexually assaulted a woman in a New York hotel room.
Lagarde had served as Sarkozy’s finance minister from 2007 until leaving for the IMF.
Tapie, who had been in a long dispute with a state-owned bank, Credit Lyonnais, walked away from the arbitration with more than 400 million euros.
A career Socialist, Tapie in 2007 suddenly backed Sarkozy’s Centre-Right Union for a Popular Movement party. The amount of the award came as a shock to many, and the investigation began after critics accused Sarkozy’s government of having carried out a sham arbitration.
Stéphane Richard, Lagarde’s former chief of staff and currently the chief executive of Orange, the French telecommunications giant, has already been placed under formal investigation on “suspicion of organised fraud”.
Since the start of the investigation, prosecutors have discovered that Tapie and his lawyer had had an undisclosed relationship with the chairman of the arbitration panel, Pierre Estoup, at the time the procedure was held. All three are now under formal investigation for possible fraud.
Prosecutors have been trying to understand at what point Lagarde learned about potential irregularity in the procedure and why she did not act to stop it.
In a statement, the IMF communications director, Gerry Rice, said Lagarde was “now on her way back to Washington and will, of course, brief the board as soon as possible.