Christine Lagarde is taking time off her day job tackling the world’s financial crises to face trial on Monday for her role in a $425 million state payout to a French tycoon in 2008.
The well-respected, silver-haired head of the International Monetary Fund denies wrongdoing in the case, which dates to her time in the French government when she was finance minister.
Lagarde, 60, faces up to a year in prison and a 15,000-euro ($16,000) fine if convicted of negligence. The judges are expected to return a verdict in the wake of the last hearing, on December 20, but they can also announce a ruling at a later date.
The trial and possible conviction may raise concern about her ability to remain IMF boss. The Washington-based institution’s credibility was already shaken when her predecessor, Dominique Strauss-Kahn, also a French citizen, was forced to resign amid allegations of sexual assault in 2011.
The IMF’s board has so far supported Lagarde at all stages of the French legal proceedings, which began the month after her appointment in July 2011. It reiterated its support and confidence last week.
In an interview with France 2 television on Sunday, Lagarde said she was confident that she had done nothing wrong
“Negligence is a non-intentional offence. I think we are all a bit negligent sometimes in our life. I have done my job as well as I could, within the limits of what I knew,” she said.
Sarkozy link
Lagarde, the first woman to be appointed IMF chief, is being tried for her role in a 2008 arbitration ruling that handed 403 million euros ($425 million) to a French business magnate, Bernard Tapie, an ally of then president Nicolas Sarkozy.
Tapie, a flamboyant tycoon and former TV star, had sued French bank Credit Lyonnais for its handling of the sale of his majority stake in sportswear company Adidas in the mid-1990s.
When Lagarde became finance minister in 2007, the lengthy legal battle between Tapie and the public bank was still unresolved, and she ordered it to be settled through an unusual private arbitration panel, instead of regular courts, against the advice of her own staff.
The choice of arbitration proved disastrous for the state by leading to the massive payout to Tapie from public funds. The amount of the award prompted indignation in France.
Investigating judges say Lagarde committed a string of serious errors when she made the arbitration choice and also, later on, when she refused to challenge the deal, suggesting she may have been influenced by the political connections between Tapie and Sarkozy, according to court documents.
“Ms. Lagarde’s behavior proceeds not only from a questionable carelessness and precipitation, but also from a conjunction of faults which, by their nature, number and seriousness, exceed the level of mere negligence,” the judges wrote at the end of their investigation.
‘Highly political’
Soon after the arbitration deal was notified, investigators suspected that the whole process was rigged in favor of the magnate.
In 2013, Tapie, his lawyer, one of the arbitrators and Lagarde’s chief of staff at the ministry, Stéphane Richard, now the CEO of the telecom company Orange, were charged with gang-related fraud, and Lagarde’s Paris home was searched by police.
Tapie later got another charge of misappropriation of funds. In 2015, a court quashed the arbitration deal, and then ordered Tapie to pay the money back. Last June, the top French court ruled the arbitration was fraudulent.
On Monday, Lagarde is due to appear in the Court of Justice of the Republic, a special body that tries government ministers for alleged wrongdoing while in office.
A panel of 15 judges, including 12 lawmakers from majority and opposition parties, will pore over notes between Lagarde and her staff as she has said she was not aware of some key details at the time of her decision.
Christopher Mesnooh, legal analyst and lawyer with the Paris, New York and Washington bars, said the whole Tapie case is “highly political” and that French citizens have a “strong feeling about it” because “there is a question of public money involved”.
“(Lagarde) had a high government position when the decision was made to pursue the arbitration and then not to appeal the award,” he told The Associated Press.
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