IMF Head Lagarde Under Investigation by French Court

 I reviewed the candidates for IMF head on May 23, "Old Europe" backs French finance minister Lagarde for IMF head. The traditional choice of a European to head IMF was challenged by candidates from Mexico and Asia. The United States ultimately tilted toward the French finance minister who is now in office.

The article noted that there was a controversial case pending in French court regarding Lagarde's actions as finance minister. She made a favorable ruling in a matter regarding a close friend and ally of French President Nicholas Sarkozy. It appeared that her actions resulted in an award viewed as excessive for the Sarkozy ally. The loser in that matter appealed to a French court. At the time, it was known that:

"A three judge panel of the Court of Justice for the Republic will recommend for or against further investigation by mid June. A yes on investigating Lagarde would end her chances for the IMF position.."Economic Populist, May 23

The decision was delayed and the US-European alliance pushed the nomination through. Today, the Guardian had this headline:

Christine Lagarde faces inquiry over €285m payout for Sarkozy ally
Judge orders investigation into controversial decision made by new IMF chief in 2007 when she was French finance minister


A French court has ordered a formal investigation into whether the IMF head Christine Lagarde abused her position when she was finance minister in allowing a huge state settlement to a businessman friend of President Nicolas Sarkozy. Guardian, August 4

The Guardian article is well worth reading. It details the process and the very real reasons to have suspicions regarding Lagarde's possible conflict of interest or worse, criminal actions, in the case involving her bosses political pal. The IMF issued a statement when questioned about Lagarde's role in the critical international organization:

"It would not be appropriate for the board to comment on a case that is currently before the French judiciary. However, the board is confident that she will be able to effectively carry out her duties as managing director." Provided by the Guardian August, 4

So there you have it. The IMF chose Lagarde when there was a legal cloud over her head. Had the court decided that no further investigation was warranted, that choice would have been justified. The fact that there was sufficient evidence to proceed to an investigation shows the IMF had reckless disregard for judicial, political and financial realities of Lagarde's status at the time. IMF also proceeded to risk IMF's standing and reputation, severely tattered at this point, once again and clearly made the wrong bet. We can expect those who made the decision to receive medals or some other award from an international body soon.


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