IMF board voices confidence in Lagarde

The International Monetary Fund's executive board on Tuesday reiterated confidence in managing director Christine Lagarde after a French court grilled her over a state payout to a disgraced tycoon when she was finance minister. "As we have said before, it would not be appropriate to comment on a case that has been and is currently before the French judiciary," the board said in a statement. "However, the executive board has been briefed on this matter, including on the outcome of the recent hearings before the Court of Justice of the Republic in Paris, and has reaffirmed its confidence in the Managing Director's ability to effectively carry out her duties." Lagarde was interviewed by the court on Thursday and Friday as judges sought to determine whether to prosecute her over a 400-million-euro ($517 million) state payout to controversial businessman Bernard Tapie, decided when she was finance minister five years ago. At the conclusion, the court declined to place her under formal charges, which could have challenged her ability to continue leading the IMF. But she was not completely freed from the threat of prosecution, as the court kept her tied to the case as an "assisted witness," akin to a material witness. Ahead of her court appearance, worries had grown that the IMF faced more trouble with its chief, two years after Lagarde's predecessor Dominique Strauss-Kahn was forced to resign following his arrest in New York on sexual assault allegations. Criminal charges were later dropped and he agreed to a financial settlement in a civil suit. Lagarde has consistently maintained that she made the correct decision when she allowed Tapie's claim against the French government, regarding a 15-year-old dispute he had with state-owned Credit Lyonnais, to go to an arbitration panel, which ultimately resulted in the payout. Critics say the state should not have taken the risk of being forced to pay compensation to a convicted criminal who was bankrupt at the time. Lagarde, 57, said Friday that being kept tied to the case as a witness was not a surprise, and defended her actions in the case. "I have always acted in the best public interest and in accordance with the law," she said. "My explanations came as a response to the doubts that had been brought up regarding the decisions I had taken at the time," she added. On Tuesday French judicial sources said police had detained for questioning in the case a lawyer and one of the three judges that had served on the Tapie arbitration panel. Ted Truman, of the Peterson Institute for International Economics in Washington, was not surprised by the IMF board's continued endorsement of Lagarde. "When she was was elected the board knew that this was hanging over her, and felt this was not going to be an impediment to her carrying out the job. This judgment turns out to be correct," he told AFP. Douglas Rediker, who was US representative on the IMF board from 2010-2012, said the US government also appeared not to be troubled by the case. "Nothing seems to suggest that they're unhappy," he said.