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IMF head Lagarde convicted in French negligence trial

Bloomberg logoBloomberg 12/19/2016 Gaspard Sebag

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International Monetary Fund chief Christine Lagarde was convicted of negligence by a Paris court over her handling of a multi-million euro dispute during her time as France’s finance minister nearly a decade ago.

The judges on the Cour de Justice de la Republique said that Lagarde should have done more to overturn a 285 million-euro ($297 million) payout to a businessman in an arbitration case. The 60-year-old managing director of the IMF won’t face a fine or prison term, Judge Martine Ract-Madoux said Monday.

Lagarde’s lawyer said she hasn’t decided whether to appeal the sentence. She was cleared of another count related to her initial decision to enter into the arbitration agreement.

The trial looked into how Lagarde handled a decade-old dispute between former state-owned bank Credit Lyonnais and businessman Bernard Tapie over the 1993 sale of Adidas AG. Lagarde allowed the disagreement to go to arbitration in mid-2008, and then didn’t appeal the payout, which later was cut to zero. The case has been a distraction to Lagarde’s duties at the IMF, the institution leading efforts to combat the global financial crisis and provides billions of dollars in loans to countries at risk of default.

Lagarde didn’t fully examine the award, whose “violent wording” could “only have led the minister” to seek to overturn it in court, Ract-Madoux said. “Overall, Lagarde was negligent in seeking information” to guide her views about a bid for annulment, the court president said.

On the second day of the trial earlier this month, Lagarde told the court, which specializes in ministerial misconduct, she’d relied on her then-chief of staff, Stephane Richard, to screen thousands of documents and provide advice on using arbitration in the dispute.

© Bloomberg

Richard Didn’t Testify

Richard, now Orange SA’s chief executive officer, refused to testify during the trial, citing a parallel criminal probe that allowed him to keep silence.

Bruno Bezard, a former senior French official who is a long-time critic of Lagarde, said the failure to appeal the award was a “scandalous decision.” He was head of the French investment agency Agence des Participations de l’Etat, which briefed Lagarde’s ministerial cabinet on the situation.

Lagarde had said she was aware of the French investment agency’s opposition to arbitration, but believed the possible benefits outweighed any disadvantages.

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