If the Court of Justice of the Republic backs the prosecutor’s request it would cast a pall over Lagarde’s stewardship of the International Monetary Fund a month after she took office amid global economic turmoil.
Prosecutors say Lagarde abused her authority by approving a 285 million euro (248 million pounds) payment to businessman Bernard Tapie in 2008 to settle his claim that former state-owned bank Credit Lyonnais defrauded him in the 1993 sale of his stake in sports clothing business Adidas.
Tapie, a former left-wing government minister who switched sides to support Sarkozy’s 2007 presidential campaign, had lost the case in 2006 before France’s highest court and was appealing the decision when Sarkozy won power.
Lagarde, who denies any misconduct, overruled objections from some ministry officials to drop the judicial case and pressed ahead with the arbitration, arguing it was needed to resolve the long-running case swiftly.
There is no suggestion she profited personally in any way from the final settlement.
However, judicial sources said it was likely a probe would be opened after two senior finance ministry officials have been referred to disciplinary panels and are the subject of a police investigation.
France’s cumbersome justice system means a probe could run on for years, hanging over Lagarde as she tries to make her mark at the IMF and win over critics, particularly emerging nations angry at Europe’s six-decade stranglehold on the Fund’s top job.
Lagarde, a lawyer by training, won the IMF job after its former managing director Dominique Strauss-Kahn — another former French finance minister — resigned following his arrest in May on charges of attempting to rape a New York hotel maid.
Wary of further embarrassment, the Fund wrote tougher ethical guidelines into Lagarde’s contract.
An inquiry could take months to get started as it cannot begin until a replacement is found for Jean-Louis Nadal, the public prosecutor who recommended the inquiry at the request of opposition Socialist party lawmakers but then retired in June.
The court was initially due to make its decision in early June, but judges asked for more time to weigh the evidence.
If an inquiry is opened, a panel of judges at the court would need to wait for a full report on the case which would be put together by whoever replaces Nadal. Reuters