Second legal probe ups pressure on IMF candidate Lagarde

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A second legal probe into France's handling of a business dispute upped the pressure Wednesday on Finance Minister Christine Lagarde, one day before she was to make her case to become head of the IMF.

Lagarde is considered the frontrunner for the IMF job, despite allegations that she abused her authority in cutting short a legal battle between tycoon Bernard Tapie and his bank, sending the parties into arbitration.

But on Wednesday, judicial sources told AFP that prosecutors have begun an inquiry into whether the head of a state entity administering the bank's debts 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 can only add to the climate of suspicion surrounding her handling of the Tapie case.

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

The arbitration panel eventually decided the businessman should be paid 385 million euros ($553 million) from the public purse in damages and interest after the alleged mishandling by the state-run bank of the sale of his sportswear brand Adidas.

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

The Court of Justice of the Republic -- which in France is the body which decides whether ministers can be prosecuted for alleged wrongdoing in office -- is to rule on July 8 whether Lagarde can be formally investigated.

Lagarde is to appear before the International Monetary Fund's executive board in Washington on Thursday to make the case for why she should lead the global lender.

She is up against Mexican central bank chief Agustin Carstens, who has been billed as the candidate of the world's developing economies, which have never before been represented in the position of IMF managing director.

The two are vying to replace France's Dominique Strauss-Kahn, who resigned from the position in May to face trial in New York on charges of sexually assaulting a hotel maid. He has denied the allegations.

© 2011 AFP

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