Lagarde guilty of negligence but avoids sanction
The International Monetary Fund (IMF) was thrown into turmoil yesterday after its managing director, Christine Lagarde, was found guilty of "negligence" over a huge payout to a business tycoon while she served as French finance minister.
In a boost to her hopes of keeping her job at the upper echelons of international finance, the French Court of Justice of the Republic, a special tribunal for ministers, chose not to punish her or give her a criminal record. She had faced a one-year term and a €15,000 fine.
However, the result of the one-week trial threatens to derail the career of the first woman to become finance chief of a Group of Eight country.
The IMF's executive board is expected to meet to consider the negligence verdict as soon as today.
Ms Lagarde, who was not in court to hear the verdict but apparently in Washington, home of the IMF, maintained her innocence throughout the process, and the prosecutor had asked for an acquittal over the "very weak" case after advising against bringing it to court in the first place.
Proceedings centred on Ms Lagarde's decision in 2007 to allow a dispute over business magnate Bernard Tapie's sale of the Adidas sports brand to Credit Lyonnais bank to be resolved by a rarely used private arbitration panel, instead of through the courts.
Ms Lagarde (60) was accused of wrongdoing on two counts: agreeing to the arbitration and failing to challenge the subsequent €404m award.
In its verdict, the court of three professional magistrates, six senators and six MPs, found no fault in Ms Lagarde's decision to launch the arbitration procedure. But it found her guilty of "negligence" in choosing not to appeal against the arbitration panel's ruling. She should have asked for more details concerning "such a shocking sentence", said Judge Martine Ract-Madoux.
This negligence was "one of the determining causes" behind the decision to hand Mr Tapie a transfer later found to be fraudulent. But the judge ruled that Ms Lagarde should be spared any punishment, meaning she has a clean criminal record, given her "international reputation" and the fact that at the time she was handling "the international financial crisis".
Investigators suspected that the "colossal" payout to Mr Tapie (73) resulted from an illicit agreement with Nicolas Sarkozy (61), who was then president, in return for supporting Mr Sarkozy's 2007 election bid.
Ms Lagarde's disgraced predecessor, Frenchman Dominique Strauss-Kahn, stood down as IMF managing director to fight sexual assault charges.
Ms Lagarde, whom IMF members reappointed in February, has won respect from global finance leaders for pushing governments to do more to boost economic growth.
Ireland was among the backers for her second term of office, despite her pushing for a hike in our 12.5pc corporation tax rate.
Finance Minister Michael Noonan struck up a close working relationship with Ms Lagarde during Ireland's post-Troika economic recovery.
Ms Lagarde's lawyer, Patrick Maisonneuve, said immediately after the ruling yesterday that they would look into appealing the decision. But although an appeal could clear her name, it could also turn out worse for Ms Lagarde since she was not given a sentence.
"Since Madame Lagarde was not sentenced, I wonder about whether to appeal or not to the highest court," Mr Maisonneuve told reporters.
Ms Lagarde, who described the case as a five-year ordeal for her, argued in the trial last week that she had acted in good faith, and with the public interest in mind.
The case dates back to a time when Mr Tapie sued the French state for compensation after selling his stake in sports company Adidas to then state-owned Credit Lyonnais in 1993. He accused the bank of defrauding him after it resold its stake for a much higher price. He was awarded a €404m payout, including interest and damages. (© Daily Telegraph, London)