World First Look

IMF head Christine Lagarde convicted, but not punished, in negligence trial

A special French court found Christine Lagarde guilty for her role in a 2008 arbitration award to a French businessman, but declined to hand a sentence to the International Monetary Fund managing director.

Managing Director of the International Monetary Fund Christine Lagarde reacts before the start of her trial about a state payout in 2008 to a French businessman, at the courts in Paris, last week. A French court found Lagarde guilty of negligence but did not hand down a sentence.
Charles Platiau/Reuters
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Caption

A French court has handed down a guilty verdict to Christine Lagarde, current head of the International Monetary Fund, and France’s finance minister in 2008 when the events in question took place.

Convicting the former minister of negligence, the Court of Justice of the Republic, which is dedicated to hearing cases concerning ministers, declined to impose any punishment. The IMF's managing director had faced up to a $15,600 fine and a year in prison.

The IMF’s executive board is now due to meet “to consider the most recent developments.”

"The context of the global financial crisis in which Madame Lagarde found herself in should be taken into account," said the principal judge Martine Ract Madoux, according to Reuters, by way of explaining the lack of a sentence.

The case concerns a payout worth some $425 million by the French state in 2008 to business tycoon Bernard Tapie. Mr. Tapie had claimed that Crédit Lyonnais, a bank partly owned by the French state, had underpaid him for Adidas shares he had sold in order to avoid a conflict of interest in advance of taking up a government post.

According to the judgement, Ms. Lagarde should have protested the arrangement, rather than allowing taxpayers to foot the bill for such a sum.

Yet some argue that convicting Lagarde is unjust, even in the absence of any kind of punishment.

“She is the one of the most scrupulous persons I have ever worked with, so any notion that she might have gone along with a deal she thought was legally wrong should be rejected,” former chief economist of the IMF, Olivier Blanchard, told the Financial Times. “And she is [an] extremely conscientious person and a workaholic. 'Negligence' is the opposite of how she works.”

While the conviction perpetuates a string of unwelcome attention assailing the position of IMF director – Lagarde’s predecessor, Dominique Strauss-Kahn, having resigned in 2011 over a sex assault scandal – the fund’s shareholders were aware of the pending proceedings when they appointed Lagarde to a second five-year term in February.

Indeed, Lagarde is given much credit for recovering the IMF’s reputation following the travails of Mr. Strauss-Kahn, and observers have suggested that, barring a prison sentence, her hold on the top spot would likely not be in jeopardy. The French government has already expressed its continuing confidence in her ability to lead the IMF.

Support has been forthcoming from other quarters, too, with former US Treasury secretary, Larry Summers, talking of a “sorry day for French justice,” telling the Guardian that Lagarde was the “best thing” to happen to the IMF in years.

“I expect she will maintain support from a wide range of board member countries, given that she has been well respected across the EU, US and emerging market universe of countries,” Douglas Rediker, former US representative to the IMF, told the Financial Times. “And, given global fragility and uncertainty, no one wants to have leadership of another major institution called into doubt again.”

This report includes material from the Associated Press and Reuters.

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