IMF Head Christine Lagarde Convicted in France

christine-lagardeChristine Lagarde. Drew Angerer/Getty Images/AFP
  • IMF Head Christine Lagarde Convicted in France

International Monetary Fund chief Christine Lagarde was convicted of negligence by a Paris court over her handling of a multimillion-euro dispute during her time as France’s finance minister nearly a decade ago.

The 60-year-old managing director of the IMF won’t face a fine or prison term, Judge Martine Ract-Madoux said Monday. The judges on the Cour de Justice de la Republique said that Lagarde should have done more to overturn a 285 million-euro ($300 million) payout to a businessman in an arbitration case.

The trial has been an ongoing distraction to Lagarde’s duties at the IMF, which was on the front lines of the effort to combat the global financial crisis and provides billions of dollars in loans to countries at risk of default. The Washington-based institution said it would meet shortly to consider the verdict.

Patrick Maisonneuve, Lagarde’s lawyer, said he couldn’t understand the reasoning behind the verdict.

Lagarde “requested opinions from lawyers — and that’s where I don’t understand the court’s decision,” said Maisonneuve. “She always acted in the general interest, with knowledge of the facts.”

Lagarde, who didn’t attend Monday’s hearing, was cleared of another count related to her initial decision to enter into the arbitration agreement.

1993 Adidas Sale

The trial looked into how Lagarde handled a decade-old dispute between former state-owned bank Credit Lyonnais and businessman Bernard Tapie over the 1993 sale of Adidas AG. Lagarde allowed the disagreement to go to arbitration — at the start of the financial crisis — and then didn’t appeal the payout, which later was cut to zero.

Lagarde didn’t fully examine the award, the “violent wording” of which could “only have led the minister” to seek to overturn it in court, Ract-Madoux said. “Overall, Lagarde was negligent in seeking information” to guide her views about a bid for annulment, the court president said.

Still, the court “noted that we were in a particularly difficult economic and political context that truly ate up a lot of the minister’s time,” Maisonneuve said.

On the second day of the trial earlier this month, Lagarde told the court, which specializes in ministerial misconduct, she’d relied on her then chief of staff, Stephane Richard, to screen thousands of documents and provide advice on using arbitration in the dispute.

Richard Didn’t Testify

Richard, now Orange SA’s chief executive officer, refused to testify during the trial, citing a parallel criminal probe that allowed him to remain silent.

Bruno Bezard, a former senior French official who is a long-time critic of Lagarde, said the failure to appeal the award was a “scandalous decision.” He was head of the French investment agency Agence des Participations de l’Etat, which briefed Lagarde’s office on the situation.

Lagarde had said she was aware of the French investment agency’s opposition to arbitration, but believed the possible benefits outweighed any disadvantages.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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