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Lagarde found guilty of negligence

December 19, 2016

IMF chief Christine Lagarde has been found guilty of negligence by a French court, but she has not been sentenced. Lagarde, who will remain head of the international creditor, has said she would not appeal the verdict.

Lagarde in court
Image: picture alliance/dpa/J. N. Guillo

Christine Lagarde, head of the International Monetary Fund, was found guilty of negligence in an arbitration case on Monday but will remain at her post. The French Court of Justice of the Republic ruled she was guilty on charges of negligence, but Lagarde escaped punishment.

After providing more evidence earlier in the day, Lagarde had left France for Washington, meaning she was not present for the verdict in her trial, a lawyer told Reuters.

Despite the verdict, the IMF's executive board on Monday reaffirmed its support for Lagarde, who was reappointed to a five-year term in February, saying the international creditor had "full confidence in the managing director's ability to continue to effectively carry out her duties."

At the heart of the trial was Lagarde's 2007 decision to allow a dispute over flamboyant businessman Bernard Tapie's sale of the Adidas sports brand to Credit Lyonnais bank to be resolved by an unusual private arbitration panel, instead of through the courts.

Tapie had sold Adidas to Credit Lyonnais for the equivalent of 315.5 million euros ($328.6 million) in 1993. The bank sold it on the following year for 701 million euros, prompting claims from Tapie that he had been cheated. The case went to a private arbitration panel, which awarded 404 million euros to Tapie. 

Lagarde, a 60-year-old former corporate lawyer, argued in court on Friday that she had acted in good faith in approving the payment to Tapie to settle the row, and that her sole aim had been "to defend the general interest." But she has faced accusations that the arbitration process was a flawed way to deal with the dispute with Tapie, and was also accused of failing to challenge the very large award that emerged from the arbitration. 

Lagarde said she was not happy with the verdict but that she would not appeal. 

"I have been held negligent, but without penalty, without sanction, without registration of the decision," she said. "I am not satisfied with it, but there's a point in time when one has to just stop, turn the page and move on and continue to work with those who have put their trust in me."

In theory, Lagarde, who has been IMF chief since 2011, could have faced a one-year prison sentence and a 15,000-euro fine. She was tried by the Court of Justice of the Republic, a tribunal staffed by judges and members of parliament that hears cases against ministers accused of wrongdoing in office.

Lagarde's voice cracked with emotion during testimony on Friday as she said the trial had put her family - she is the mother of two sons - through a "testing" time.

Doubtful procedure

Lagarde waved through the settlement to Tapie in 2008. The payout raised concerns given Tapie's vocal support for Lagarde's then boss, ex-President Nicolas Sarkozy, and it was subsequently canceled by the courts.

Lagarde told the trial she had trusted the judgment of her subordinates in the process, and had not been included in some of the negotiations in the ministry and in the president's office. A member of her high-powered legal team, Bernard Grelon, argued she could not be held responsible for what happened later.

"The fault here is not one of negligence, it is having taken a decision which turned out badly," he told the court.

As IMF chief, Lagarde has been a key player in bailout negotiations for Greece, and has also worked to reform the US- and Europe-dominated institution to reflect China's growing global leverage.

She succeeded her disgraced compatriot Dominique Strauss-Kahn as IMF managing director after he resigned to fight sexual assault charges. Another former IMF head, Rodrigo Rato of Spain, is currently standing trial on charges of misusing funds when he was head of Spanish lender Bankia.

nz/hg (Reuters, AFP, dpa)