Head of IMF arrested and accused of sexual assault

[Jan Klimkowski]

Hmmmmm

Christine Lagarde faces inquiry over €285m payout for Sarkozy ally

Judge orders investigation into controversial decision made by new IMF chief in 2007 when she was French finance minister

Angelique Chrisafis in Paris guardian.co.uk, Thursday 4 August 2011 16.01 BST

A French court has ordered a formal investigation into whether the IMF head Christine Lagarde abused her position when she was finance minister in allowing a huge state settlement to a businessman friend of President Nicolas Sarkozy.

The court of justice of the republic, a special tribunal qualified to judge ministers, ruled there were grounds to examine Lagarde's role in arbitrating in favour of the controversial tycoon Bernard Tapie in 2008.

Tapie, the former owner of the football club Olympic Marseille and Socialist minister, served a seven-month jail term in 1997 for match-fixing and has a tax fraud conviction. In recent years he has made a remarkable public comeback as an actor, singer, chatshow host and prominent supporter of the president.

The Largarde investigation concerns a decades-long legal dispute Tapie had with a former state-owned bank which he claimed cheated him when handling the 1993 sale of his Adidas sports empire.

In 2007, Lagarde ended the dispute by ordering a special panel of judges to arbitrate an out-of-court settlement.

They ruled that Tapie should receive €285m (£247m) in damages from the public purse, a ruling that scandalised opposition politicians.

A judicial inquiry will now examine Lagarde's decision to order arbitration instead of letting the Tapie affair be decided by the courts. It will also consider whether she refused expert advice to appeal against the huge payout, simply allowing Tapie to walk away with his cheque.

The French inquiry into Lagarde is likely to drag on for years and could cast a shadow over her leadership of the IMF. At the end of the investigation, judges will decide whether she should face trial. Lagarde has denied any misconduct in the case.

Lagarde, a lawyer who was one of Sarkozy's most popular ministers, took over leadership of the IMF in Washington on 5 July after the former head, Dominique Strauss-Kahn, resigned amid allegations he attempted to rape a New York hotel maid.

Lagarde's lawyer, Yves Repiquet, immediately issued a statement saying the French judicial inquiry would not affect her IMF duties. "This procedure is in no way incompatible with the current functions of the managing director of the IMF," he said.

The statement was supported by a similar comment from the IMF board, which said: "It would not be appropriate for the board to comment on a case that is currently before the French judiciary. However, the board is confident that she will be able to effectively carry out her duties as managing director."