French court orders investigation into Lagarde

Thu Aug 4, 2011 1:42pm EDT
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By Thierry Leveque and Alexandria Sage

PARIS (Reuters) - A French court ordered an investigation on Thursday into possible misconduct by IMF head Christine Lagarde when, as finance minister, she approved a settlement to a businessman friend of President Nicolas Sarkozy.

The investigation will get underway at once into Lagarde's alleged complicity in the misuse of public funds in her approval of a 285-million-euro ($407-million) arbitration payout to Bernard Tapie in 2008, the court's prosecutor said.

Lagarde has denied any misconduct and the Washington-based International Monetary Fund, where she started as managing director last month, said its board was confident she would be able to effectively carry out her duties despite the investigation.

Analysts said the investigation, which could run for months or even years, should not immediately hurt the credibility Lagarde has built up around the world in her years as finance minister.

Yet it will be an awkward blight on the Frenchwoman's IMF debut as she tries to turn the page from her predecessor Dominique Strauss-Kahn's exit from the post in a sex assault scandal.

An IMF board official told Reuters anonymously that the news was "not unexpected but still disturbing."

"Today's news is politically unhelpful but on the other hand I would be surprised if this triggered a dynamic making this a major issue and affecting Lagarde's stewardship at this stage," said Thomas Klau of the European Council on Foreign Affairs.

"There is obviously no direct link between her responsibilities at the IMF and the issue under review, which goes back to her early days as finance minister. That said, any appearance of impropriety of any kind has become potentially more virulent as a result of the Strauss-Kahn affair," he said.   Continued...

<p>IMF managing director Christine Lagarde holds a news briefing at the International Monetary Fund headquarters in Washington, July 6, 2011. REUTERS/Kevin Lamarque</p>