Christine Lagarde to remain head of IMF after negligence trial

Christine Lagarde was spared a prison sentence. Picture: AFP/Getty ImagesChristine Lagarde was spared a prison sentence. Picture: AFP/Getty Images
Christine Lagarde was spared a prison sentence. Picture: AFP/Getty Images
Christine Lagarde will remain head of the International Monetary Fund despite being convicted of negligence in a case dating to her tenure as France's finance minister.

The IMF’s executive board said it had “full confidence” in Lagarde’s ability to carry out her duties at the head of the Washington-based international lending agency.

After a week-long trial, France’s Court of Justice of the Republic on Monday found Lagarde guilty of one count of negligence but spared her jail time and a criminal record.

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The 60-year-old IMF leader had potentially faced a year of imprisonment and a fine for not seeking to block a fraudulent 2008 arbitration award to a politically connected tycoon when she was finance minister.

Lagarde thanked the board for the vote of confidence “in my ability to do my job”. She said she would not appeal against the French court’s decision.

“I am not satisfied with it, but there’s a point in time when one must stop, turn the page and move on,” she said.

Lagarde, a lawyer, became France’s first female finance minister in 2007, overseeing the country’s response to the financial crisis that rocked the global economy from 2008. She is also the first woman to head the IMF.

“She is a strong leader,” US Treasury Secretary Jacob Lew said after the board’s decision. “And we have every confidence in her ability to guide the fund at a critical time for the global economy.”

The Court of Justice of the Republic is a special tribunal to hear cases of alleged criminality by ministers in office and is made up of three judges and 12 parliamentarians.

It ruled that Lagarde’s negligence in her management of a long-running arbitration case involving tycoon Bernard Tapie helped open the door for the fraudulent misappropriation of public funds. Lagarde herself was not accused of fraud.

The case revolves around a 403 million-euro (£337 million) arbitration award given to Mr Tapie in 2008 over the botched sale of sportswear giant Adidas in the 1990s.

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Civil courts have since quashed the unusually generous award, declared the arbitration process and deal fraudulent and ordered Mr Tapie to refund the money.

The special court’s presiding judge, in reading the verdict, said Lagarde should have asked her aides and others for more information about the “shocking arbitration award”.

In deciding not to sentence Lagarde, the court noted that the award to Mr Tapie has since been annulled, sparing damage to the public purse. It also noted that Lagarde was busy at the time with the global economic crisis.

Lagarde’s “personality and national and international reputation” also counted in her favor in the decision not to punish her, the court ruled.

Lagarde, who was not present for the verdict, maintained her innocence through the trial. The prosecutor had asked for an acquittal in the case, which began in 2011.

The special court acquitted Lagarde of negligence in her original decision to put the Tapie case to arbitration. But it found her guilty in a subsequent decision not to contest the amount of the arbitration award.

The legal battle between Mr Tapie and Credit Lyonnais over the public bank’s sale of his Adidas stake was still unresolved when Lagarde took over at the Finance Ministry in 2007.

Lagarde ordered that the dispute be settled through a private arbitration panel, instead of regular courts. The massive award raised questions about whether Mr Tapie benefited from his political connections, including with then-President Nicolas Sarkozy, Lagarde’s boss when she was his finance minister.

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