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Abuse of power?

August 4, 2011

The head of the IMF, Christine Lagarde, has come under suspicion for abuse of power. A French court ruled she should be investigated for her role in settling a financial spat while she was France's finance minister.

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Christine Lagarde
Lagarde thinks her name will be clearedImage: dapd

Just as the lawyers were loosening their grip on Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF) who resigned because of sexual assault allegations, they've tightened it on his IMF successor, Christine Lagarde.

After deliberations lasting several months, the Republican Court of Justice – the only French court with the power to try ministers accused of illegal acts carried out while in office – has decided to follow the recommendation of the public prosecutor and launch an investigation into what the French press is calling the 'Tapie affair.'

The Tapie affair dates from 1997 when, as Finance Minister, Lagarde decided to abandon the usual legal channels to settle a long-running legal battle between the French government and French tycoon Bernard Tapie. He was disputing the terms of the purchase of his stake in the German sportswear company, Adidas, by the Credit Lyonnais bank.

The court will try to establish whether there is sufficient evidence to press charges against Lagarde for misuse of public money and complicity with fraud.

List of mistakes

Lagarde's critics say she should have had more faith in the public judicial system. Instead she required the parties to go to a private arbitration panel, which recommended paying Tapie almost 400 million euros of public money - money which, her critics say, she should have refused to pay.

Bernard Tapie
Tapie was awarded around 400 million in damages and interestImage: AP

Another issue that should have been a sticking point was the presence of a lawyer who had previously worked for Tapie on the arbitration panel.

Lagarde's lawyer, Yves Repiquet, said Thursday's decision would allow his client to prove these allegations were false.

"I see one obvious advantage which is that after all the misinformation I've read," he said, "this investigation will be able to dissipate all doubt and all ambiguity and will show that Ms. Christine Lagarde has never committed any offense."

French reputation

The court's decision to investigate Lagarde has some in France fearing for the reputation of their country. Lagarde's IMF predecessor is embroiled in an affair involving alleged sexual assault, and now Lagarde is accused of financial wrongdoing.

But economist Jean-Paul Pollin predicted the pursuit of legal action would not prevent Lagarde carrying out her duties at the head of the IMF.

"Ms. Lagarde's credibility comes from the support of world leaders she enjoys," he said. "The Tapie affair may be shocking for people in France but seen from the United States, Brazil or China it seems complicated and unimportant when set aside the role the IMF has to play in the current economic crisis."

Three judges will carry out an investigation expected to take several years before they decide whether to put Lagarde on trial.

Author: John Laurenson, Paris / mz
Editor: Michael Lawton