Christine Lagarde. Photo Reuters
IMF chief Christine Lagarde has been put under formal
investigation by French magistrates for alleged negligence in a
political fraud affair dating from 2008 when she was finance
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
"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 longstanding Tapie litigation," she
said in a statement on Wednesday.
"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.
Lagarde's lawyer, Yves Repiquet, told Reuters he would
personally appeal the magistrates' decision. That means
Lagarde would not have to return to Paris in the meantime,
allowing her to continue her duties as managing director of
the International Monetary Fund uninterrupted.
"She is now on her way back to Washington and will, of
course, brief the (IMF) board as soon as possible," IMF
spokesman Gerry Rice said. "Until then, we have no further
The inquiry relates to allegations that Tapie, a supporter of
conservative former President Nicolas Sarkozy, was improperly
awarded 403 million euros ($531 million) in an arbitration to
settle a dispute with now defunct state-owned bank Credit
The inquiry has already embroiled several of Sarkozy's
cabinet members and France Telecom's chief executive,
Stephane Richard, who was an aide to Lagarde when she was
Sarkozy's finance minister.
In previous rounds of questioning, Lagarde has not recognised
as her own the pre-printed signature to sign off on a
document facilitating the payment, Repiquet told Reuters by
telephone. However, Richard has stated that Lagarde was fully
briefed on the matter.
The offence of negligence by a person charged with public
responsibility in France carries a maximum penalty of one
year's imprisonment and a 15,000-euro fine.
Lagarde was a star in Sarkozy's cabinet and well respected by
peers, pushing through many of the high-profile initiatives
in France's presidency of the Group of 20 nations.
She has been managing director of the IMF since 2011 after
her predecessor at the global lender, Frenchman Dominique
Strauss-Kahn, resigned over sexual assault charges that were
The IMF's board discussed the possible consequences of the
Tapie case before deciding to select Lagarde, the board said
at the time. It has continued to support her through various
stages of the case.
The IMF is traditionally headed by a European, and five of
the last eight managing directors have been French. But the
BRICS group of large emerging markets - Brazil, Russia,
India, China and South Africa - protested the tradition
during the last selection process in 2011, saying that
continued European dominance could undermine the IMF's
Lagarde competed for her post against Mexican central bank
Governor Agustin Carstens.
The IMF's No. 2 official, David Lipton, an American, would
likely take over as acting managing director if Lagarde were
not able to perform her duties.
Tapie, a colourful and often controversial character in the
French business and sports world, sued the state for
compensation after selling his stake in sports company Adidas
to Credit Lyonnais in 1993.
He claimed the bank had defrauded him after it later resold
his stake for a much higher sum. Credit Lyonnais, now part of
Credit Agricole, has denied wrongdoing.
Investigators are trying to determine whether Tapie's
political connections played a role in the government's
decision to resort to arbitration that won him a huge
pay-out. He has denied any wrongdoing.