The International Monetary Fund is investigating its boss, Dominique Strauss-Kahn, to see whether he abused his position in connection with a sexual relationship with a subordinate, the Wall Street Journal said on Saturday. The IMF is under the spotlight as several countries have turned to it for finance to help ease the effects of a global financial crisis and politicians consider the fund's role in preventing future crises.
The paper said the IMF had hired the law firm Morgan, Lewis & Bockius LLP in late August to carry out the investigation which is expected to be completed by the end of October.
The probe was sought by A. Shakour Shalaan, who represents Egypt and other Arab countries on the IMF board with the advice of the US and Russian representatives, the paper said. "There was an allegation concerning improper behaviour of a personal nature on the part of the managing director," it quoted IMF chief spokesman Masood Ahmed as saying.
"All allegations, particularly relating to senior management, need to be investigated." In a statement, Strauss-Kahn, a respected economist, said: "I have cooperated and am continuing to co-operate with outside counsel to the Fund concerning this matter."
He said the "incident which occurred in my private life" took place in January 2008. "At no time did I abuse my position as the Fund's managing director." The Wall Street Journal said the case was provoking criticism within the IMF because not all 24 members of the board were aware of the investigation until Friday.
Internal critics said members who had knowledge of the allegations may have been able to use that information in policy and funding disputes with Strauss-Kahn, the paper said. It said the probe concerned Strauss-Kahn's relationship with Piroska Nagy, who at the time was a senior official in the IMF's Africa department.
She resigned in August as the IMF reduced the size of its work force and now works at the European Bank for Reconstruction and Development. The investigation is looking at whether Nagy, who is married to Argentine-born economist Mario Blejer, got a larger severance package than would otherwise have been expected.
The investigation follows the resignation in June 2007 of World Bank President Paul Wolfowitz over a promotion and pay rise for his long-term companion who worked at the institution. Strauss-Kahn's predecessor at the IMF, Spaniard Rodrigo Rato, stepped down suddenly in June 2007 for personal reasons, ending his five-year term prematurely.
The results of the investigation will be distributed to the IMF board when it has been completed. "If the allegations (that he abused his position) are true, I think (Strauss-Kahn) would have to go," Michael Mussa, former IMF chief economist told the newspaper.
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