IMF’s Lagarde banking on credibility in French trial

IMF managing director Christine Lagarde is facing negligence charges as part of an embezzlement case in a Paris court.
IMF managing director Christine Lagarde is facing negligence charges as part of an embezzlement case in a Paris court. REUTERS/Jacky Naegelen

IMF chief Christine Lagarde denied wrongdoing in her handling of a massive French state payout to a tycoon as she went on trial Monday in a case that risks tarnishing her stellar career.

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Lagarde says she’s confident the court will agree she did nothing wrong in decisions that led to a 400-million euro payment to a businessman when she was finance minister.

The case goes back to 1993, when businessman Bernard Tapie sold his stake of sportswear company Adidas, to then state-owned bank Crédit Lyonnais.

When the state sold the same assets at a much higher price, Tapie claimed he’d been defrauded and sued for compensation.

Lagarde entered the picture in 2008, when she approved an out-of-court arbitration that awarded Tapie some 404 million euros.

The arbitration was controversial, and investigators suspect it was rigged in favour of Tapie, who supported then-president Nicolas Sarkozy.

A Paris appeal court overruled the settlement, forcing Tapie to repay the money, and prompting Tapie to launch a counter-appeal, which is still pending.

Credibility is key in negligence charges

For her part, Lagarde is accused of negligence leading to misuse of public funds, but says she was “confident and determined” about the trial.

“Negligence is a non-intentional offence. I think we are all a bit negligent sometimes in our life,” Lagarde told French television France 2 on the eve of the trial.

“I have done my job as well as I could, within the limits of what I knew.”

By not contesting the facts of the decision to lead to arbitration, Lagarde is depending on the credibility of her claim that she did not know what was happening, which obliges her to answer to two concerns.

“She agreed to arbitration, and she refused to appeal the arbitration award that granted Tapie more than 400 million euros,” says Anne Deysine, a French lawyer and legal specialist.

“The reason she puts forward is that this case had been dragged on many years and cost the taxpayer and the state a lot of money in legal fees.”

But the former lawyer-turned-politician may also need to elaborate on why she did not act even after the arbitration.

“Because she is a lawyer, there is the idea that she should have known what was going on,” Deysine says.

“Her defence is that her chief of staff did not tell her everything, and that because the case has been going on for 25 years, there was no way that, as a minister, she had the time to go through thousands of pages dealing with the case.”

Consequences of a guilty verdict

If convicted, Lagarde could face up to a year in jail and a fine of 15,000 euros.

It could also bring trouble for her position with IMF, less than six months after she was appointed to a second five-year mandate, even though the lender is firmly behind Lagarde for now.

“She managed to impose herself as a very good leader,” says Françoise Nicolas, who researches global economics at the French Institute of International Relations.

“At this stage she is still backed by the institution, that’s no problem, but of course everything may change as the procedure goes on.”

The IMF also initially backed Lagarde’s predecessor Dominique Strauss-Kahn, another French politician who left the post due to the considerably different but no less legal difficulties of a sexual assault scandal in 2011.

If it comes to that, Anne Deysine says it's not so much the credibility of IMF that's at risk.

“For me, it’s more the credibility of France,” says Deysine. “I mean, we’ve sent two people and they’ve both ended up with legal and other types of difficulties.”

But she believes Lagarde’s track record will keep her in the institute’s favour.

“The IMF has been moving its policy under Lagarde’s governance, and moving in the right direction, not imposing those stability and recovery plans that have killed so many countries and so many economies before,” she says.

“So I’m fairly optimistic she can stay at the head of the IMF.”

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