Ms Lagarde was questioned by magistrates in Paris this week for a fourth time under her existing status as a witness in the long-running saga over allegations that tycoon Bernard Tapie won a large arbitration payout due to his political connections.
In a statement yesterday, Ms Lagarde said: “After three years of procedure, the sole surviving allegation is that, through inadvertence or inattention, I may have failed to intervene to block the arbitration that brought to an end the long-standing Tapie litigation.
“I have instructed my lawyer to appeal this decision, which is without merit.”
Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.
Ms Lagarde’s lawyer, Yves Repiquet, said he would appeal the magistrates’ decision. That means Ms Lagarde would not have to return to Paris from the United States in the meantime, allowing her to continue without interruption her duties as IMF managing director.
IMF spokesman Gerry Rice said: “She is now on her way back to Washington [DC] and will, of course, brief the [IMF] board as soon as possible. Until then, we have no further comment.”
The inquiry relates to allegations that Mr Tapie, a supporter of former conservative president Nicolas Sarkozy, was improperly awarded €403 million (about £320m) to settle a dispute with now-defunct state-owned bank Crédit Lyonnais.
The inquiry has already embroiled several of Mr Sarkozy’s ministers, as well as France Telecom’s chief executive Stéphane Richard, who was an aide to Ms Lagarde when she was Mr Sarkozy’s finance minister.
In previous rounds of questioning, Ms Lagarde has not recognised as her own a pre-printed signature to authorise a document facilitating the payment, Mr Repiquet said. However, Mr Richard has stated that Ms Lagarde was fully briefed on the matter.
The offence carries a maximum penalty of one year’s imprisonment and a fine of €15,000 (£12,000).
Ms Lagarde was a star in Mr Sarkozy’s administration, pushing through many of the high-profile initiatives in France’s presidency of the G20.
She has been managing director of the IMF since 2011. The IMF board discussed the possible consequences of the Tapie case before deciding to select Ms Lagarde, it said at the time.
Mr Tapie, a colourful character in the French business and sports world, sued the state after selling his stake in sports company Adidas to Crédit Lyonnais in 1993. He claimed the bank had defrauded him after it later resold the stake for a much higher sum. Crédit Lyonnais, now part of Crédit Agricole, has denied wrongdoing.