IMF chief Christine Lagarde faces negligence trial in France

Christine Lagarde, who has managed the International Monetary Fund since 2011, faces accusations of negligence after France's government handed $425 million to a business magnate with ties to the president in 2008.

First Look

International Monetary Fund head Christine Lagarde is due to begin a trial in French court Monday over accusations that she was negligent in approving an arbitration in 2008 that led the French state to hand over $425 million of public money to a tycoon with ties to the president.

Ms. Lagarde was France’s new economy and finance minister at the time, having taken office in the midst of a legal battle between French business magnate Bernard Tapie and the formerly state-owned bank Crédit Lyonnais. Mr. Tapie, a supporter of then-President Nicolas Sarkozy, sued the state for compensation, arguing that the bank had defrauded him when he sold it his stake in sports company Adidas in 1993. He claimed the bank resold his stake for a much higher sum.

Lagarde ordered the case to settle through an unusual private arbitration panel, instead of regular courts, which ended in a massive, and controversial, payout to Tapie.

While the arbitration judges had ruled in Tapie's favor by ordering the payment of public funds, appeals courts subsequently have overturned the decision. A Paris appeals court ordered Tapie to return the money, though he is fighting that decision.

Now, the IMF chief is scheduled to appear in the special Cour de Justice de la République, which tries government ministers for alleged wrongdoing while in office. This will be only the fifth trial in the history of the court, which is made up of three judges and six lawmakers from both the lower and upper houses of parliament.

If convicted, Lagarde faces up to a year of jail time and a 15,000-euro ($16,000) fine. The trial is due to last until Dec. 20. Her attorney, Patrick Maisonneuve, said on European radio that he will seek a delay Monday, arguing that it doesn't make sense for Lagarde to go on trial while a separate investigation of Tapie is still underway.

The IMF chief, the first woman to become finance minister of a Group of Eight industrialized countries – France, Germany, Italy, the United Kingdom, Japan, the United States, Canada, and Russia – denies giving special preference to Tapie, or following orders from Mr. Sarkozy to do so.

"Negligence is a non-intentional offense. 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," Lagarde said on France 2 television.

The IMF, a global economic organization made up of 189 member countries, has so far supported Lagarde throughout the legal troubles, which began soon after she took helm at the Washington, D.C.-based organization in 2011. But Lagarde's conviction would revive embarrassing leadership troubles at the organization, which began when Lagarde’s predecessor, Dominique Strauss-Kahn, also French, was forced to resign amid a sex scandal.

This report includes material from the Associated Press and Reuters.