International Monetary Fund (IMF) chief Christine Lagarde has been found guilty of “criminal negligence” for her role in a massive arbitration award made to a tycoon in 2008 while she was serving as France’s finance minister.
Despite being convicted by a special French court of agreeing and failing to challenge a huge award of taxpayers’ cash made to businessman Bernard Tapie over the disputed sale of a company he owned, Lagarde will face no punishment after judges decided against imposing a sentence of up to one year in prison and a €15,000 fine on her.
The guilty verdict will however tarnish Lagarde’s reputation and call into question her ability to remain at the helm of the IMF after Dominique Strauss Kahn, a fellow French national, resigned in disgrace over a sex assault scandal some five years ago.
While judges found no fault with Lagarde’s decision to seek an out-of-court settlement with Tapie after he accused the French government of undervaluing an investment he was forced to sell before taking up an official post in the early nineties, they ruled she was negligent in failing to challenge the €400 million award he received, in a move they said amounted to a misuse of public funds.
Tapie has been ordered to pay back the money, but is appealing the decision.
Appearing in court last week, a sobbing Lagarde said she had acted in good faith.
On Friday, she told the court: “This five day hearing put an end to a five-year ordeal for my partner, my sons, my brothers, who are here in this courtroom. In this case, like in all the other cases, I acted with trust and with a clear conscience with the only intention of defending the public interest.”
In a statement delivered by her lawyer this afternoon, Lagarde said she welcomed the fact that she would face no punishment, but added she would have preferred to have been cleared.
The main judge in the case, Martine Ract Madoux, said: “The context of the global financial crisis in which Madame Lagarde found herself in should be taken into account.”
A spokesperson for the IMF said the lender’s board would meet soon to discuss the verdict, but gave no indication of how it might affect Lagarde’s position. Some commentators have suggested the court’s decision could trigger a new leadership crisis at the IMF.
During the court case, Lagarde maintained that she did not act on the instructions of her then boss Nicolas Sarkozy, who was serving as French President when she presided over the Tapie arbitration. Sarkozy, who is currently himself facing a number of allegations of corruption, has come under criticism for being an ally of the superrich.
