French court delays ruling on probe into IMF's Lagarde

8th July 2011, Comments 0 comments

A French court on Friday delayed its ruling on whether the new head of the IMF, former French finance minister Christine Lagarde, will face a criminal probe over her handling of a tycoon's lawsuit.

The Court of Justice of the Republic, which is charged with deciding whether ministers can be investigated over alleged offences committed in office, said it had pushed back its much-anticipated decision until August 4.

A statement from the court said simply that one of its members had "belatedly" decided to recuse himself from the case, delaying proceedings.

It had been due to rule on Friday, just three days after Lagarde took up her new responsibilities at the International Monetary Fund, the world's lender of last resort and a pillar of global financial governance.

The IMF board chose Lagarde for the job despite allegations that she abused her authority in cutting short a legal battle between tycoon Bernard Tapie and his bank and sending the parties into binding arbitration.

The arbitration panel eventually decided the businessman should be paid 385 million euros from the public purse in damages and interest after the alleged mishandling by Credit Lyonnais of the sale of his sportswear brand Adidas.

Credit Lyonnais was state-run at the time of disputed transaction, and its debts were later collected under the CDR -- a "bad bank" set up and run by the state to regroup the group's disputed and bad debts.

As such, the damages and interest owed to Tapie, of which he has reportedly already received around 200 million euros, have had to come from the public purse, triggering public anger at a time of economic austerity.

Lagarde's political opponents have criticised the decision to cut short the legal battle between the CDR and Tapie, an acquaintance of President Nicolas Sarkozy, and prosecutors allege she may have exceeded her powers.

Last month, judicial sources told AFP that prosecutors have begun a second inquiry into whether the head of the CDR concealed information relevant to the arbitration from his own board.

Lagarde is not personally targeted in this second inquiry, but the official was under her ministry's authority and the investigation has only added to the climate of suspicion surrounding her handling of the Tapie case.

Officials in Lagarde's office, speaking on condition of anonymity, last month dismissed the latest allegations as a rehash of a report on a news website earlier this month "with the same errors and inaccuracies".

She, meanwhile, insists she herself did nothing wrong in taking a decision she said saved time and public money by halting a lengthy legal battle.

Lagarde, a 55-year-old former corporate lawyer, took up the Washington post at the IMF to replace the previous French leader of the institution, economist and Socialist politician Dominique Strauss-Kahn.

Strauss-Kahn was forced to resign when he was arrested after being accused of sexual assault by a New York hotel maid. His trial continues, despite the prosecution admitting to doubts about the alleged victim's testimony.

© 2011 AFP

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