IMF Head in Court in Fraud Probe       05/23 07:23

   International Monetary Fund chief Christine Lagarde is facing questions at a 
special Paris court Thursday over her role in the 400 million euro ($520 
million) pay-off to a controversial businessman when she was France's finance 
minister.

   PARIS (AP) -- International Monetary Fund chief Christine Lagarde is facing 
questions at a special Paris court Thursday over her role in the 400 million 
euro ($520 million) pay-off to a controversial businessman when she was 
France's finance minister.

   The court hearing threatens to sully the reputations of both Lagarde and 
France. The payment was made to well-connected entrepreneur Bernard Tapie as 
part of a private arbitration process to settle a dispute with state-owned bank 
Credit Lyonnais over the botched sale of Adidas in the 1990s. It is seen by 
many in France as an example of the cozy relationship between big money and big 
power in France.

   Lagarde has earned praise for her negotiating skills as managing director of 
the IMF through Europe's debt crisis and is seen as a trailblazer for women 
leaders. Her decision to let the Adidas dispute go to private arbitration 
rather than be settled in the courts has drawn criticism, and French lawmakers 
asked magistrates to investigate.

   Lagarde, smiling at reporters, left her Paris apartment Thursday morning and 
appeared at a special court that handles cases involving government ministers. 
She has denied wrongdoing.

   At the time of the payment, Tapie was close to then-French President Nicolas 
Sarkozy, who was Lagarde's boss. Critics have said the deal was too generous to 
Tapie at the expense of the French state, and that the case shouldn't have gone 
to a private arbitration authority because it involved a state-owned bank.

   Investigators opened an inquiry in 2011 into possible charges of "complicity 
to embezzlement of public funds" and "complicity to forgery." The probe may not 
result in a trial. If it does, and if Lagarde were to be convicted, she could 
face up to 10 years in prison, according to prosecutors.

   The dispute over the Adidas deal had been dragging through French courts for 
years, and one question for Lagarde is why the government didn't let the courts 
continue to battle it out.

   "What she is being criticized for today is taking the disputes between the 
bank, Mr. Tapie and the French state out of the national court system and 
submitting them to three private arbitrators, who decided basically behind 
closed doors how to resolve the dispute," said Christopher Mesnooh, a lawyer 
from Field Fisher Waterhouse in Paris who is not connected to the case.

   Lagarde and the Washington-based IMF were aware of the probe when she took 
over as managing director of the fund from Dominique Strauss-Kahn in 2011. The 
IMF has expressed its confidence in Lagarde throughout the investigation.

   In March, French investigators searched Lagarde's Paris home. Her lawyer 
said at the time that she welcomed the search as a step toward proving her 
innocence.

   French Finance Minister Pierre Moscovici told Le Monde newspaper this week 
that the government may seek to annul the arbitration deal if enough evidence 
emerges of wrongdoing.

   Tapie --- a flashy tycoon and former football club owner who has also tried 
his hand as an actor, singer and government minister --- insists that he 
deserved the settlement. He says the investigation into the deal is "bogus," a 
politically motivated hunt by the governing Socialists against Sarkozy's 
conservatives. Tapie himself may be targeted in a separate probe.

   "Lagarde's fate doesn't concern me," Tapie said on Europe-1 radio Thursday.

   "When evidence is discovered, then we'll talk."


(KA)