IMF Chief Lagarde Faces Possible Jail Time For Payment to French Businessman

International Monetary Fund chief Christine Lagarde was ordered Thursday to stand trial over allegations she illegally handed over an arbitration payout of 400 million euros, or $432 million, to French businessman Bernard Tapie in 2008.

It’s a huge setback for Lagarde, who denies wrongdoing in the legal battle that dates back 22 years and has ensnared several prominent French politicians and government officials. Earlier this year, she appeared to be off the hook when prosecutors said the case should be dropped.

But first, a bit of background.

In 1993, Tapie sold Adidas AG to the Crédit Lyonnais bank for 315.5 million euros, or $341 million. A year later, the bank turned around and sold the German athletic apparel juggernaut for 701 million euros, or $758 million.

Tapie — a prominent French financier, actor, and onetime French sports teams owner — sued. He accused Crédit Lyonnais of intentionally undervaluing Adidas when he sold it.

For years, the case made its way through French courts, eventually landing at the feet of Lagarde, who in 2008 fronted an arbitration panel reviewing the case. The panel ultimately decided to pay Tapie hundreds of millions of euros from French coffers.

At the time, Lagarde was finance minister to former French President Nicolas Sarkozy, whose 2007 presidential run was publicly backed by Tapie.

The arbitration panel’s decision to pay off Tapie prompted a national outcry. And now, Lagarde must defend herself in a French court against charges of “negligence by a person in position of public authority,” according to France’s iTele TV channel and the Mediapart website.

In other words, prosecutors allege she approved the payment as a reward for Tapie’s 2007 support for Sarkozy. If convicted, she faces a year behind bars and up to $16,208 in fines.

Lagarde’s lawyer, Yves Repiquet, told iTele the Thursday decision to pursue charges is “incomprehensible. I will recommend Madame Lagarde appeal against this decision.”

Earlier this month, a French court ordered Tapie to pay back the money.

Lagarde became IMF chief in 2011, after fellow French citizen Dominique Strauss-Kahn was arrested and accused of sexually assaulting a cleaner at a New York hotel. Those charges were subsequently dropped.

IMF spokesperson Gerry Rice said the bank would continue “to express its confidence in the managing director’s ability to effectively carry out her duties.”

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