IMF's Christine Lagarde's home searched

Journalists film the Paris apartment of Christine Lagarde in connection with their probe of a financial scandal that occurred when she was the French finance minister. Journalists film the Paris apartment of Christine Lagarde in connection with their probe of a financial scandal that occurred when she was the French finance minister. Photo: Martin Bureau, AFP/Getty Images Photo: Martin Bureau, AFP/Getty Images Image 1 of / 3 Caption Close IMF's Christine Lagarde's home searched 1 / 3 Back to Gallery

Paris --

The French police conducted a search Wednesday of the Paris apartment of Christine Lagarde, the managing director of the International Monetary Fund, in connection with an investigation into her handling of a financial scandal when she was the French finance minister.

The investigation concerns Lagarde's decision in 2007 to refer to an arbitration panel a dispute between Bernard Tapie, a French billionaire and supporter of former President Nicolas Sarkozy, and the state-owned bank Credit Lyonnais. The panel ultimately brokered a settlement that awarded Tapie about $580 million, including interest.

A panel of investigating magistrates is looking into whether she was complicit in embezzling public money in what critics say was an overly generous award to a presidential friend.

Lagarde has repeatedly denied any wrongdoing and has expressed her willingness to cooperate with any investigation.

Gerry Rice, the director of the External Department of the IMF in Washington, declined to comment on the case Wednesday, but he said the fund's board had discussed the possibility of French legal proceedings against Lagarde before its decision to appoint her as managing director in 2011. The board at the time "expressed its confidence that Madame Lagarde would be able to effectively carry out her duties," Rice said in a statement.

In a statement, Lagarde's lawyer, Yves Repiquet, said the IMF director hoped that the results of the police search would enable the truth to be established and would "ultimately lead to the termination of all investigations."

Tapie, a former Socialist politician who switched allegiance in 2007 to support Sarkozy's center-right Union for a Popular Movement party, is a former owner of the Olympique Marseille soccer team, which borrowed 1.6 billion francs from Credit Lyonnais to buy the distressed Adidas sports empire in 1989.

But unable to keep up with the interest payments, Tapie converted his debt to the bank into shares of Adidas, which Credit Lyonnais later sold in 1993 for more than the value of the loan. Tapie accused the bank of cheating him.

When Sarkozy became president in 2007, he suggested that the Finance Ministry - which was led by Lagarde and had been overseeing the dispute - move the case to arbitration.