IMF chief Christine Lagarde was questioned in court by French magistrates on Thursday over her role in a 285-million-euro ($366 million) arbitration payment made to a supporter of former president Nicolas Sarkozy. Lagarde risks being placed under formal investigation at the hearing for her 2007 decision as Sarkozy's finance minister to use arbitration to settle a long-running court battle between the state and high-profile businessman Bernard Tapie.
Under French law, that step would mean there exists "serious or consistent evidence" pointing to probable implication of a suspect in a crime. It is one step closer to trial but a number of such investigations have been dropped without any trial. Such a move could prove uncomfortable for the International Monetary Fund, whose former head, Frenchman Dominique Strauss-Kahn, quit in 2011 over a sex assault scandal, and for a woman rated the most influential in France by Slate magazine.
In Washington, the IMF reaffirmed its confidence in her. "The board has been briefed on the matter a few times, including recently, and continues to express its confidence in the managing director's ability to effectively carry out her duties," IMF spokesman Gerry Rice said. In Paris, Lagarde flashed a smile at waiting media as she arrived at court with her lawyer and said: "It's a pleasure to see you."
They were not expected to emerge until the end of the day's proceedings, which could run into late evening. The decision on whether to place her under investigation or give her "supervised witness" status will be announced at the end of the hearing, which could last into Friday. The case goes back to 1993 when Tapie, a colourful and often controversial character in the French business and sports world, sued the state for compensation after selling his stake in sports company Adidas to then state-owned bank Credit Lyonnais. Also a one-time Socialist minister who later supported the conservative Sarkozy, Tapie said the bank defrauded him after it resold the stake for a much higher sum. Credit Lyonnais, now part of Credit Agricole, has denied wrongdoing.
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