IMF Lagarde in court

Lagarde spent more than nine hours at the Court of Justice of the Republic (CJR), which probes cases of ministerial misconduct, in Paris on Thursday. The court wants an explanation of her role in the 2008 payment of public funds to businessman Bernard Tapie.

Tapie, a former politician and businessman went to prison for match-fixing during his time as president of French football club Olympique de Marseille. Prosecutors for the CJR suspect Tapie received favorable treatment in return for supporting Nicolas Sarkozy in the 2007 presidential election.

The CJR is looking into Lagarde's role in an arbitration process that settled a long-running legal dispute between Tapie, and the state entity that had taken over the residual assets of the collapsed bank, Credit Lyonnais.

Tapie claimed that he was defrauded by Credit Lyonnais over the sale of Adidas, the sports equipment company, which he owned in the 1990s.

Prosecutors have suggested Lagarde was responsible for "numerous anomalies and irregularities" which could lead to charges for complicity in fraud and misappropriation of public funds. Tapie was paid 400 million euros ($515 million).

Lagarde has said the arbitration was necessary to put an end to a costly dispute, and has always denied having acted under orders from Sarkozy.

However, the case is potentially embarrassing for both the IMF and for France, especially if Lagarde is placed under formal investigation after the hearing. While that step does not imply guilt, it often precedes the laying of charges.

Statements of support

Although it was Socialist legislators who started the court action, the government has spoken up for her: "Madame Lagarde retains the complete confidence of the French authorities – and my own," Pierre Moscovici, the French finance minister, said earlier in the week.

IMF spokesman Gerry Rice said its executive board, at Lagarde's request, had already waived her diplomatic immunity to the extent necessary to enable her to appear before French authorities in the case: "The executive board has been briefed on this matter, including recently, and continues to express its confidence in the managing director's ability to effectively carry out her duties," he said.

Second IMF scandal since 2011

Criminal charges against Lagarde, 57, would mark the second scandal for an IMF chief since 2011. Her predecessor Dominique Strauss-Kahn, also from France, resigned over an alleged sexual assault on a New York hotel maid.

Lagarde should be informed after the questioning, which could last up to two days, if she is to be placed under formal investigation or given the less serious status of assisting witness on the allegations of complicity in falsification of the arbitration procedure and misappropriation of state funds.

jm/kms (AFP, Reuters)