Lagarde convicted; won't face jail term

Christine Lagarde was convicted of negligence by a Paris court over her handling of a multimillion-euro dispute during her time as France’s finance minister nearly a decade ago, raising questions about her role as head of the International Monetary Fund.
 
The 60-year-old managing director of the IMF won’t face a fine or prison term, Judge Martine Ract-Madoux said on Monday. The judges on the Cour de Justice de la Republique, which specialises in ministerial misconduct, said that Lagarde should have done more to overturn a Euro 285 million ($300 million) payout to a businessman in an arbitration case.
 

The trial has been an ongoing distraction to Lagarde’s duties at the IMF, which was on the front lines of the effort to combat the global financial crisis and provides billions of dollars in loans to countries at risk of default. The Washington-based institution said after the ruling that it would meet shortly to consider the verdict.
 

“Of course, Lagarde has been set back by this verdict,” Michael Fuchs, a deputy parliamentary caucus leader of German Chancellor Angela Merkel’s party, said in an interview. “What the consequences will be is hard to say.”
 
Patrick Maisonneuve, Lagarde’s lawyer, said he couldn’t understand the reasoning behind the verdict.

 
Lagarde was diligent and “requested opinions from lawyers — and that’s where I don’t understand the court’s decision,” said Maisonneuve. “She always acted in the general interest, with knowledge of the facts.”
 
Lagarde, who didn’t attend Monday’s hearing, was cleared of another count related to her initial decision to enter into the arbitration agreement.
 
The conviction puts the IMF in an awkward position as Lagarde is the second straight managing director of the fund to run into legal troubles. Her predecessor, Dominique Strauss-Kahn, resigned in 2011 amid allegations that he sexually assaulted a maid at a New York hotel.

 
The Paris trial looked into how Lagarde handled a dispute between former state-owned bank Credit Lyonnais and businessman Bernard Tapie over the 1993 sale of Adidas. Lagarde allowed the disagreement to go to arbitration — at the start of the financial crisis — and then didn’t appeal the arbitral award.
 
The subsequent government payout was cut to zero last year after doubts were cast on the impartiality of one of the three arbitrators.
 
Lagarde didn’t fully examine the award, the “violent wording” of which 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.
 
Lagarde should have sought proper explanations from her staff after learning that the Tapie award included — against her own wishes — Euro 45 million in damages, Ract-Madoux said. Lagarde’s decision not to seek to annul the award “permitted the Tapie couple to embezzle Euro 45 million.”
 
Still, the court “noted that we were in a particularly difficult economic and political context that truly ate up a lot of the minister’s time,” Maisonneuve said.
 
 The Cour de Justice also noted her “international reputation” to explain why she didn’t deserve a penalty or a sentence.

 
On the second day of the trial earlier this month, Lagarde told the court, which specialises 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.
 
Richard, now Orange’s chief executive officer, refused to testify during the trial, citing a parallel criminal probe that allowed him to remain silent. He has been charged by French investigative magistrates of hiding key elements in the Tapie case from Lagarde, including administrative notes that opposed arbitration.