Declined
French court declines to investigate Lagarde
A French court looking into whether International Monetary Fund chief Christine Lagarde played a role in the alleged misuse of state funds when she was finance minister said Friday that it regarded her as a key witness in the case but not as a suspect.
After two consecutive days of questioning, magistrates in a special court that oversees the conduct of current and former government ministers opted not to take the more serious route of placing Ms. Lagarde under formal investigation.
The decision was a vindication of sorts for Ms. Lagarde, who has repeatedly said her handling of the case was lawful.
"I was able to provide information to demonstrate that I have always acted in the best public interest and in accordance with the law," she said after leaving the court. "Now, it's time for me to go back to work in Washington, and I will of course be briefing my board."
Claude Soulier, the general secretary of the court, confirmed Ms. Lagarde's status as a material witness. They are deemed to have a deeper knowledge about a case than regular witnesses and are given access to court documents.
Magistrates can decide to change the status and place her under formal investigation later in their investigation if they find new evidence. But their decision not to do so now after grilling Ms. Lagarde for over 24 hours suggests such a move is less likely.
A formal investigation could have led to charges against Ms. Lagarde, as well as fines and a prison sentence, if she was convicted.
The French court is probing allegations—made by lawmakers from the then-opposition Socialist Party—that Ms. Lagarde overstepped her authority in 2007 when she referred a case pitting businessman Bernard Tapie against the state to an arbitration panel.
The lawmakers alleged that her decision smoothed the way for Mr. Tapie to reap bigger damages from the French Treasury than he would otherwise have won in the courts, as a form of thanks for his support for Nicolas Sarkozy, a conservative, in his successful 2007 presidential bid.
Ms. Lagarde, a long-time corporate lawyer, has repeatedly rejected those allegations. During her campaign for the top IMF job two years ago, she asked several independent lawyers to prepare memos on the case and file them to the IMF's legal counsel.
"Ms. Lagarde has two strengths, the truth and her conscience," her lawyer Yves Repiquet said on French television. "It was logical for her to clear the doubts against her."
The IMF has repeatedly expressed its support for Ms. Lagarde, who took over the top job in July 2011 after the institution was rocked by the arrest and resignation of Dominique Strauss-Kahn following charges of sexually assaulting a maid in a New York hotel room. Those charges were eventually dropped and Mr. Strauss-Kahn—also a former French finance minister—denied any wrongdoing.
IMF spokesman Gerry Rice, in a statement after the court's decision Friday, said the IMF's executive board "has been briefed on this matter several times and on each occasion expressed confidence in the managing director's ability to effectively carry out her duties."
The arbitration decision followed a complex case in which Mr. Tapie alleged that a state-owned bank had defrauded him in the 1990s. The bank was later bailed out and the bulk of its liabilities transferred to a state-owned vehicle. That meant Mr. Tapie ended up in conflict with the government.
Under Ms. Lagarde, France's finance ministry referred the case to an arbitration panel in 2007 to prevent it from dragging on for years in France's sluggish court system, racking up legal costs for the state, according to Ms. Lagarde's lawyers.
At the time, the Socialist Party alleged that Mr. Tapie received special treatment because of his ties to Mr. Sarkozy. Leading Socialist lawmakers called for an investigation of Ms. Lagarde.
Now that the Socialists are in power, however, President François Hollande's government is in the awkward position of backing Ms. Lagarde in order to keep the top IMF job in French hands.
(Published by The Wall Street Journal – May 24, 2013)