Christine Lagarde, the new head of the IMF is to be investigated by a French court for abuse of authority during her time as the French Finance Minister. Ms Lagarde has been accused of wrongly influencing a bank to enter into binding arbitration over a dispute with an entrepreneur who backed French President, Nicholas Sarkozy during his election campaign.
The charge of misconduct has been denied by Ms Lagarde and there is no suggestion as yet that she profited from the agreement. The investigation is at the very least extremely embarrassing for Ms Lagarde who has been in position at the IMF for only one month.
The investigation by the French court into their new head is also further embarrassment for the beleaguered IMF, after their previous boss, Dominique Strauss Kahn also from France, was arrested in May this year in New York. He was charged with the attempted rape of a maid at the New York hotel he had been staying at.
The French prosecutor has said that the probe will focus on whether Ms Lagarde was complicit in the misuse of local funds. However any investigation will be lengthy and could take months or even years to be concluded.
Ms Lagarde’s lawyer, Yves Repiquet has said that she will not allow the inquiry to interfere with her high profile new job. He said, “This procedure is in no way incompatible with the current functions of the managing director of the IMF”.
He went on to say that the inquiry was malicious, saying it was “suspicion abusively cast on Christine Lagarde by a handful of opposition members of parliament for political ends”.
Prosecutors claim that Ms Lagarde abused her position by allowing a €285 million payment to businessman Bernard Tapie, a supporter of President Sarkozy and former owner of Marseilles football club, Adidas the sports clothing and footwear giant as well as a cycling team which twice won the Tour De France.
Mr Tapie was in dispute with French Bank Credit Lyonnais and had lost a High Court case against them. However, Ms Lagarde intervened in the case and pushed the bank and Mr Tapie into binding arbitration, which saw the businessman win the huge payout.