French probe into Lagarde delayed until after IMF decision

10th June 2011, Comments 0 comments

A French court will rule on July 8 whether to allow a probe into claims Finance Minister Christine Lagarde abused her power, by which time she could be head of the IMF, judicial sources said Friday.

Lagarde is the frontrunner in the race to lead the International Monetary Fund, despite a legal threat hanging over her at home, where she could face prosecution over her role in a multi-million euro business dispute.

Nominations for the managing director position close on Friday and the IMF board is due to select a new leader by the end of the month, but Lagarde will be left guessing about her legal status until more than a week after that.

"The petition commission of the Court of Justice of the Republic will make its decision known on July 8 at its next sitting," a judicial official said, referring to a court which decides whether ministers can be investigated.

On that date, the court will make one of three rulings: It could decide Lagarde has no case to answer, it could order a formal investigation into her conduct or it could request more information on which to make a decision.

But, the legal sources warned, any inquiry may be further delayed as the chief prosecutor who would be charged with probing the minister has retired since asking for a ruling and has not yet been replaced.

In 2007 Lagarde ordered that a dispute between renowned entrepreneur Bernard Tapie and a formerly state-owned bank be settled by private arbitration.

The panel found that the bank had mishandled the 1993 sale of the tycoon's adidas sportwear brand and he was awarded 385 million euros ($558 million) in damages and interest. This was paid to Tapie out of public funds.

Prosecutors now argue that Lagarde may have abused her position, in cutting short the official inquiry and insisting on arbitration, but she insists that halting the long-running and complex case was in the public interest.

Some media commentators and opposition figures have criticised the decision to authorise such a huge pay out to a controversial business figure, reputed to be on goiod terms with Lagarde's boss President Nicolas Sarkozy.

In the latest episode in the long-running scandal, the French news website Mediapart reported Friday that Lagarde had known that one of the members of the arbitration panel was an associate of Tapie's lawyer, but did nothing.

The site argued this apparent conflict of interest could leave the panel's ruling open to review, but Lagarde's ministry insisted the report contained no new information that had not previously been examined by investigators.

If the Court of Justice for the Republic allows an inquiry Lagarde could be charges with abusing her authority and, in found guilty, would face five years in jail and a fine of 55,000 euros.

In Paris it is not expected to come to that, but the case has hung over Sarkozy's IMF candidate as she tries to drum up support.

The post has been left empty since May, when the previous managing director, French economist and presidential hopeful Dominique Strauss-Kahn was arrested on charges he sexually assaulted a New York hotel chamber maid.

Lagarde is backed by most European governments to take over, but has encountered resistance from some emerging economy countries which feel the time has come for Europe to lose its longstanding monopoly on the IMF position.

Late Thursday, she sought to blunt this criticism by arguing in an online dialogue with Twitter users from around the world that she would encourage the organisation to recruit a more diverse range of staff.

"There should be appropriate and proportionate representation at staff level to express and respect both diversity and universality," she said, in response to a question from journalist Alicia Gonzalez about Latin American managers.

"Reform is under way to improve representativeness at governance and staff levels, it should continue to warrant legitimacy," Lagarde added.

Lagarde was in Lisbon on Friday, lobbying African governments at a meeting of the African Development Bank to support her candidacy.

© 2011 AFP

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