Lagarde quizzed over pay-off deal
International Monetary Fund chief Christine Lagarde has faced questions at a special Paris court over her role in the 400 million euro (£342 million) pay-off to a controversial businessman when she was France's finance minister.
The court hearing threatens to sully the reputations of both Ms Lagarde and France. It is seen by many in France as an example of the cosy relationship between big money and big power in 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.
Ms 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 politicians asked magistrates to investigate.
Ms Lagarde, smiling at reporters, left her Paris apartment and appeared at a special court that handles cases involving government ministers. She has denied wrongdoing.
IMF spokesman Gerry Rice said its executive board, at Ms Lagarde's request, had already waived her diplomatic immunity to the extent necessary to enable her to appear before French authorities in the case. "The executive board has been briefed on this matter, including recently, and continues to express its confidence in the managing director's ability to effectively carry out her duties," he said.
At the time of the payment, Mr Tapie was close to then-French president Nicolas Sarkozy, who was Ms Lagarde's boss. Critics have said the deal was too generous to Mr Tapie at the expense of the French state, and that the case should not 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 Ms Lagarde were to be convicted, she could face up to 10 years in prison, according to prosecutors. Ms 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 Ms Lagarde throughout the investigation.