Christine Lagarde, I.M.F. Chief, Is Found Guilty of Negligence

2016-12-19 16:32:15

 

Christine Lagarde, I.M.F. Chief, Is Found Guilty of Negligence

PARIS — Christine Lagarde, the managing director of the International Monetary Fund, was found guilty on Monday of criminal charges linked to the misuse of public funds during her time as France’s finance minister, a verdict that could force her out of her post.

The judge hearing the case declined, however, to impose a fine or any jail time on Ms. Lagarde, who began her second five-year term at the I.M.F. in February. The scandal has overshadowed her work at the fund, to which she was appointed in 2011, after Dominique Strauss-Kahn resigned as managing director when he was accused of having sexually assaulted a maid in a New York City hotel.

The move is quite likely to destabilize the I.M.F. as it faces a host of thorny issues, including questions over its participation in a multibillion-dollar bailout for Greece and uncertainty about the United States’ role in the organization once Donald J. Trump becomes president in January.

The verdict was a surprise, after the prosecutor in the trial said last week that the case against her was “very weak” and did not appear to be enough to win a conviction.

It is a theme prosecutors have previously repeated, notably in calling in September 2015 for the case against Ms. Lagarde to be halted. But a special court, set up in 1993 to hear cases against France’s politicians, overrode that recommendation.

Speaking to reporters after the hearing, Ms. Lagarde’s lawyer, Patrick Maisonneuve, said he had a “mixed” reaction to the verdict.

“On the one hand, she is found responsible, but given the circumstances, given the responsibilities that Ms. Lagarde had at the time — in 2008, we were in a major economic crisis — the court decided that it would not sentence Ms. Lagarde to anything,” he said.

Ms. Lagarde’s lawyers can appeal the verdict before France’s highest criminal court, the Cour de Cassation, on procedural grounds, but Mr. Maisonneuve suggested they might not, because she had not received any sentence.

Ms. Lagarde did not attend the latest hearing, but was in Paris last week for the case.

Gerry Rice, a spokesman for the Washington-based I.M.F., said the fund’s executive board would meet later on Monday to consider its options.

The session will be anything but perfunctory. The board could ask for her resignation immediately, or Ms. Lagarde could offer it up voluntarily. But both of these steps are considered long shots, given that the fund just recently swung its weight behind her.

For years, the I.M.F.’s practice of automatically awarding the top job to a senior European official has been criticized, especially as emerging economies like China, Brazil and Mexico have seen their influence grow — economically and otherwise.

Of the last six leaders of the I.M.F., four have come from France, the last two of whom — Ms. Lagarde and Mr. Strauss-Kahn — have encountered serious legal problems.

The trial also revived concerns in France about high-level corruption, shining a spotlight on intimate ties between politicians and businesspeople, and on the large sums that are sometimes used to grease the country’s political wheels.

The case against Ms. Lagarde centered on Bernard Tapie, a former entertainer and owner of Adidas who had previously been jailed on corruption charges. Mr. Tapie accused the lender Crédit Lyonnais, in which the French state had a stake at the time, of cheating him when it oversaw the sale of his share in the sportswear empire in 1993. Years of costly legal battles ensued.

In 2007, Ms. Lagarde sent the dispute to a three-person private arbitration authority that awarded Mr. Tapie more than 400 million euros, or $420 million at current exchange rates, in damages and interest, to be paid by the state.

Her critics said that decision was politically tainted, and she was charged with negligence for allowing the arbitration and for then declining to appeal the panel’s verdict. The court on Monday found her guilty of negligence for declining to appeal the panel’s verdict, but not for allowing the arbitration in the first place.

The trial against Ms. Lagarde was just one facet of the scandal — many people associated with it are under investigation, for accusations as varied as embezzlement and organized fraud.

Legal proceedings are expected to begin next year against Stéphane Richard, the chief executive of the French telecommunications giant Orange and the former chief of staff to Ms. Lagarde, who said that she had relied on his judgment to send Mr. Tapie’s case to arbitration.

Mr. Tapie, who has been ordered by a French court in 2015 to repay the full amount with interest after a judge invalidated it, is expected to be called to a separate trial. He is under bankruptcy protection and has not repaid the sum.

Separately, a judge on the arbitration panel that heard Mr. Tapie’s case is accused of fraud and is expected to be tried, as is Mr. Tapie’s lawyer.

Witnesses at Ms. Lagarde’s trial described a system in which influential, wealthy members of the French elite, like Mr. Tapie, had easy access to government officials and parlayed those relationships to the advantage of both parties, sometimes at the expense of taxpayers.

Bruno Bézard, a former director of the French Treasury, described “curious relationships” at the Finance Ministry when he worked there with Ms. Lagarde, saying that Mr. Tapie was often seen walking around the hallways, presumably to visit officials — “which was rather unexpected.”

Mr. Bézard, who led a government body overseeing state holdings, including a bank set up to take over Crédit Lyonnais’ bad assets, said Ms. Lagarde had ignored repeated warnings from members of his staff not to proceed with arbitration. He suggested that Ms. Lagarde had further erred by not challenging the amount of the payout.

“I was more shocked by the speed with which we gave up on contesting it than by the speed of the arbitration decision,” he said. “Given that the amount was so scandalous, even if we had one chance in 1,000 to win, it should have been done.”

Ms. Lagarde testified that she had declined to do so because it could have resulted in a slew of new lawsuits from Mr. Tapie and additional costs to the state.

Mr. Tapie, a former Socialist who served in the administration of President François Mitterrand in the 1990s, switched political allegiances and in 2007 backed the presidential campaign of Nicolas Sarkozy — the president at the time of the arbitration hearing.

Mr. Tapie visited the Élysée Palace, the seat of the French presidency, at least 20 times during Mr. Sarkozy’s first two years in office, the French news media reported. The businessman is said to have met with Mr. Sarkozy and François Fillon, the prime minister at the time and the front-runner in next year’s presidential election.

Add comment