July 15, 2024

French Court Delays Ruling on Lagarde Investigation

The Court of Justice, which oversees ministers’ actions in office, said it would delay a decision on whether to look into her handling in 2007 of a court case involving a French tycoon until July 8. That means that there will be no legal clarity on the issue until after the I.M.F. has chosen its next managing director on June 30.

Ms. Lagarde and Agustín Carstens, Mexico’s central bank governor, both declared officially Friday that they were running for I.M.F. managing director, beating a deadline of midnight Friday in Washington set by the fund.

Also Friday, Russia nominated Grigori Martchenko, Kazakhstan’s central bank president. Mr. Martchenko has acknowledged that Ms. Lagarde, who is backed by European leaders, is the favorite in the race.

South Africa’s finance minister, Trevor Manuel, said Friday that he would not run.

Ms. Lagarde traveled to Lisbon on Friday to gather support from African leaders at a meeting of the African Development Bank, the latest in a series of campaign stops she has made to persuade leaders of emerging countries that she should get the job.

These countries have expressed alarm that Europe is aggressively pushing to keep the I.M.F.’s top spot in European hands. But they also appear to be concluding that Ms. Lagarde would have more clout than Mr. Carstens to eventually elevate their own influence at the fund at a time when their economies’ growth is outpacing those in the West.

By all accounts, these dynamics make Ms. Lagarde the front-runner for one of the most powerful positions in global finance. But future court action may cast a cloud over those ambitions.

At issue is whether Ms. Lagarde abused her authority as finance minister in one of France’s longest-running legal soap operas.

Ms. Lagarde ordered in 2007 that a dispute that had raged in French courts for 14 years between Bernard Tapie, a flamboyant French businessman and friend of President Nicolas Sarkozy, and Crédit Lyonnais, a state-owned bank, be referred to a three-person arbitration panel.

Mr. Tapie, a former chief of the Adidas sports empire and a former minister in the Socialist Party who defected to support Mr. Sarkozy’s 2007 presidential campaign, accused Crédit Lyonnais in 1993 of cheating him when it oversaw the sale of his stake in Adidas.

It was Mr. Sarkozy who suggested that the finance ministry, which was overseeing the case because Crédit Lyonnais was a ward of the French state, move the case to arbitration.

The arbitration panel ultimately awarded Mr. Tapie a settlement of about $580 million, including interest.

Ms. Lagarde defended her decision to remove the case from the French court system, saying it would keep more taxpayer money from being spent to fight the case. The ultimate award to Mr. Tapie came from the state’s coffers.

She has also denied accusations that her decision not to appeal the award was a reward for Mr. Tapie’s political support of Mr. Sarkozy.

“I have a clear conscience,” she said two weeks ago when she announced her candidacy for the I.M.F. post. Ms. Lagarde said she would not withdraw her candidacy even if an investigation were opened.

If the court decides on July 8 not to investigate, all legal proceedings against Ms. Lagarde in the matter would stop.

If it rules otherwise, Ms. Lagarde would have to gird for a possibly lengthy legal process, although she would not necessarily be required to be present in France for the proceedings, said Christopher Mesnooh, a partner specializing in international business law at Field Fisher Waterhouse in Paris.

More important, “if they take things forward, it means they believe that there is a prima facie case,” Mr. Mesnooh said. So if Ms. Lagarde does get the I.M.F. post, “there’s still going to be a legal investigation at a very high level that will be taking place in France,” he said. “That is not ideal, given what has happened with the last managing director of the I.M.F.”

Dominique Strauss-Kahn, the previous managing director, resigned last month after he was charged with the attempted rape of a hotel maid in New York.

Although Mr. Sarkozy refrained from backing Ms. Lagarde publicly until nearly every other leader in Europe, including Chancellor Angela Merkel of Germany, had done so, he defended her recently at the Group of Eight meeting in Deauville, France.

“The legal risks weighing on the candidacy of Christine Lagarde for the I.M.F. are manageable,” he said.

Ms. Lagarde, who traveled this past week to Brazil, India and China, is to go to Saudi Arabia on Saturday and Egypt on Sunday. Mr. Carstens, who has said that 12 Latin American countries have endorsed him, plans stops in India and China.

The United States has not backed a candidate, although the Treasury secretary, Timothy F. Geithner, has said that Ms. Lagarde and Mr. Carstens are qualified.

Article source: http://feeds.nytimes.com/click.phdo?i=2e7bf24309ed33fedabefb8fb9b3644f

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