Christine Lagarde, the director of the International Monetary Fund, has been placed under formal investigation for "negligence" in the Bernard Tapie financial scandal, in which a friend of the former president Nicolas Sarkozy was awarded a €403 million out of court settlement.
Ms Lagarde was questioned for 15 hours by three judges at the Court of Justice of the Republic, a special jurisdiction for former cabinet ministers, on Tuesday. It was the fourth time she had flown from Washington, for a total of 50 hours of closed-door hearings which focused on her role in the Tapie arbitration when she was Sarkozy’s finance minister.
Ms Lagarde announced her mise en examen to Agence France Presse yesterday. The status falls short of formal charges and could lead to her being cleared or to trial. In May 2013, she was given the status of "assisted witness" in the case, meaning she was at the beck and call of judges.
Ms Lagarde’s new status in the case is good news and bad news for her. It is more serious to be placed under investigation than to be an assisted witness. On the other hand, the charge retained – negligence – is far less serious than that of accessory to fraud and the misuse of public funds, which were considered earlier.
Public funds
The maximum sentence for negligence is one year in prison and a €15,000 fine, if judges prove that Lagarde turned a blind eye to “third parties” misappropriating public funds. Conviction on a charge of being an accessory to fraud could have resulted in a 10-year sentence and €150,000 in fines.
"After three years of investigation and dozens of hours of hearings, the commission accepted the obvious; that I was not an accomplice in any infraction, and so they alleged that I was not sufficiently vigilant," Ms Lagarde said. There was no question of her resigning from her position at the IMF, she added. "I'm returning to Washington to work this afternoon." Ms Lagarde said she had instructed her lawyer to oppose her mise en examen, which she termed "completely unfounded".
A spokesman for the IMF said Ms Lagarde would inform the board, which has 188 member states, “as soon as possible”. The board was aware of the investigation into the Tapie case before Lagarde took up the post vacated by Dominique Strauss-Kahn, another former French finance minister, in 2011 and has repeatedly reconfirmed its “confidence” in her ability to “efficiently carry out her duties”.
Five men involved in the same case have been placed under investigation by a separate set of magistrates for “fraud in an organised group” for allegedly organising a “sham arbitration” to award the €403 million to Mr Tapie.
They include Ms Lagarde’s former cabinet director, Stéphane Richard, Mr Tapie’s lawyer, Maurice Lantourne, and Pierre Estoup, the chief arbiter, who had worked with Mr Lantourne on at least nine occasions.
Mr Tapie, a businessman and former politician, holds a conviction for tax fraud and served 10 months in prison for rigging a football match. Judges believe the €403 million settlement was Mr Sarkozy’s way of thanking Mr Tapie for support in Sarkozy’s 2007 presidential campaign.
Three facts led judges to place Ms Lagarde under investigation. They say the case should have stayed in government courts – as her advisors recommended – rather than be sent to private arbitration. Ms Lagarde could have rejected the chief arbiter, whose independence was in doubt. And she could have contested the final result of the arbitration, in particular a €45 million award for “mental distress”.
