Christine Lagarde to stand trial over arbitration award of €405m

Christine Lagarde, the director of the International Monetary Fund, will stand trial for negligence for allowing a sham arbitration to award €405 million to a friend of then president Nicolas Sarkozy in 2008.

France’s highest court, the court of cassation, yesterday rejected Ms Lagarde’s last appeal to avoid trial before the court of justice of the republic (CJR), a special jurisdiction for high-ranking officials.

She will be tried by a panel of six deputies from the National Assembly, six senators and three magistrates. If convicted, she could in theory be sentenced to up to a year in prison and a €15,000 fine.

The CJR is reputed for working at a very slow pace, and for showing leniency to its VIP defendants. It began considering Ms Lagarde’s case in May 2011. No date has been set for her trial but it is unlikely to occur before next spring, when Mr Sarkozy hopes to stand again for the presidency.

Mr Sarkozy is alleged to have put pressure on Ms Lagarde to approve the arbitration as a favour to Bernard Tapie, an erstwhile singer, actor, businessman and owner of cycling and football teams who was imprisoned for fixing a football match and holds a conviction for tax fraud.

Mr Sarkozy is covered by presidential immunity. Because she was finance minister at the time, Ms Lagarde enjoys a form of immunity, or at least privileged treatment, by the CJR.

She started her second, five-year term as head of the IMF on July 5th. Gerry Rice, the spokesman for the board that represents the IMF's 189 member states, yesterday expressed the institution's "confidence in the ability of the director general to efficiently carry out her duties".

The IMF board issued exactly the same statement when Ms Lagarde was formally placed under investigation in August 2014.

Expert advice

Investigating magistrates reproach Ms Lagarde for ignoring expert advice in accepting the costly and unnecessary private arbitration. Mr Tapie’s case against his former bank, Crédit Lyonnais, was already in the hands of the justice system.

The former finance minister also approved the appointment of three arbiters despite doubts about the impartiality of the chief arbiter, Pierre Estoup, who was later proven to have colluded with Mr Tapie and his lawyer, Maurice Lantourne. And she did not challenge the decision to award Mr Tapie €405 million .

Investigating magistrates found Ms Lagarde’s explanations for her actions “unconvincing, even distressing” and said she had shown “haste and carelessness constituting grave negligence on the part of a minister responsible for the conduct of the state’s affairs”.

Arbitration overturned

The court of cassation definitively overturned the 2008 arbitration on June 30th, but has not yet decided if Mr Tapie will be forced to pay back the €405 million. His lawyers say he will appeal to the European Court of Human Rights.

Mr Tapie, Mr Lantourne and Mr Estoup, and Ms Lagarde's former cabinet director Stéphane Richard are among six people being pursued in ordinary courts for "fraud in an organised group" in the same case. Mr Richard now heads France's largest telecommunications company, Orange.

Ms Lagarde's lawyer, Patrick Maisonneuve, "regretted" the court's decision to send her to trial, but stressed that the ruling "did not address the substantive question of Ms Lagarde's alleged negligence".

He also noted that the prosecutor for the CJR last September recommended the charge be dropped. It is unusual for a judge or jury to go against the prosecutor’s recommendation.