New IMF chief may be corrupt

Christine Lagarde under investigation over role in payments to Bernard TapieThe French finance minister is to be the subject of a full judicial inquiry after Tapie received £248m to end 15-year legal dispute.

She's a former synchronised swimmer who became the first female finance minister of a leading industrialised country and one of France's most popular rightwing politicians. Christine Lagarde could see her golden image shaken by a judicial investigation into whether she abused her position to favour a controversial tycoon.

Lagarde, once a lawyer in Chicago, has become embroiled in the soap-opera saga of Bernard Tapie, one of the most flamboyant and controversial figures in French public life. Tapie is a maverick rags-to-riches tycoon whose CV includes a stint as head of Marseille football club, head of the Adidas sports empire, left-wing urban affairs minister under Francois Mitterrand, a seven-month jail term for match-fixing, a conviction for tax fraud and an amazing public comeback as an actor, singer, chatshow host and supporter of Nicolas Sarkozy.

For almost two decades, a battle raged through the courts after Tapie claimed he was cheated by the Credit Lyonnais bank which handled the 1993 sale of Adidas. Credit Lyonnais, once publicly owned, had been wound up and its liabilities taken over by a state-operated consortium.

In 2007, Lagarde intervened and ended the court dispute by ordering a special panel of judges to arbitrate. In 2008, they ruled that Tapie should receive €285m (£248m) in damages. The out-of-court settlement scandalised opposition politicians. The centrist Francois Bayrou said it was "unthinkable that the state dips into the taxpayers' pocket for a private beneficiary". At the time, Lagarde tried to calm the row, saying that, after tax and debt payments, Tapie would only pocket about €30m. Later reports suggested he kept about €200m.

The Socialists accused Lagarde of improper conduct by intervening and asked for a full-scale investigation. Jean-Louis Nadal, the public prosecutor, has now recommended a full judicial inquiry into Lagarde's role, saying there was evidence of "several reasons to be suspicious of the regularity and even the legality" of the settlement, which could constitute "an abuse of authority". He suggested the case should not have been settled in private since public money was at stake.

Lagarde denounced an attempt to sully her name, telling Le Figaro: "This is an attempt to smear me." She accused Socialists of trying to gloss over the reality that the Tapie saga dated from the Mitterrand era when they were in power. She said: "For my part, I've always acted with rigour and transparency, in only one sense: the public interest." She said she was "as calm as I have always been" over the affair. She added that she had "total government support".

Eva Joly, the former anti-corruption investigative magistrate and potential green party presidential candidate, said Lagarde might have received "instructions" directly from the Elysée. She said the settlement was completely abnormal in the way it was done and the amount awarded. She said the inquiry must look at who had ordered the settlement and what they got out of it. "This could be a corruption affair."

Other politicians questioned Sarkozy's friendship with Tapie. Daniel Cohn-Bendit, Joly's fellow MEP for the green party, Europe Ecologie Les Verts, told French TV, "What I know is that Lagarde's decision was pushed by Nicolas Sarkozy. It's Sarkozy's responsibility and his friendship with Bernard Tapie that's under discussion here."

The Socialist Segolene Royal said Lagarde had not made the decision alone and was "doubtless the victim of Sarkozy's orders".

Lagarde, 55, is one of France's best known ministers abroad, for her fluent English and regular US TV appearances. She recently denied charges of a conflict of interest over a personal stake in a small business start-up, saying some people took pleasure in trying to stab her in the back. She said she handed her shares over to an intermediary to "close the controversy".

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