Christine Lagarde, the head of the International Monetary Fund, was negligent in her handling of a long-running fraud case, a French court has ruled.

A special court made up of members of parliament and magistrates announced the guilty verdict on Monday in Paris. But it also said Lagarde won't be fined, serve any jail time, or receive a criminal record.

Speaking on French TV, Lagarde's lawyer Patrick Maisonneuve described the unusual ruling and absence of a sentence as a partial acquittal, but said she may appeal.

The IMF's executive board, which has been supportive of Lagarde throughout the case, stood by her in the wake of the verdict. The board said in a statement Monday that it "reaffirms its full confidence in the managing director's ability to continue to effectively carry out her duties."

The IMF is in charge of maintaining financial stability around the world. Lagarde has played a pivotal role in IMF-backed rescues of countries on the brink of collapse, including Greece and Ukraine.

Lagarde had been accused of giving preferential treatment to businessman-turned-politician Bernard Tapie as he pursued a legal challenge against the French government. At the time, Lagarde was the French economy minister.

Tapie eventually won his case and was awarded €293 million ($306 million), plus interest. Lagarde was found to be negligent for not challenging the award of such a large sum of taxpayers' money.

She was not in court for the verdict. Her lawyer said she was in Washington for work.

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Lagarde is the third IMF managing director in a row to face legal proceedings. Her predecessor, Dominique Strauss-Kahn, resigned from the IMF in 2011 after sexual assault charges were brought in the U.S. (They were subsequently dropped.)

And Rodrigo Rato, who preceded him in the job, is currently on trial on corruption charges in Spain.

Unraveling the case

The case has its roots in the early 1990s when Tapie joined the French government and sold his stake in Adidas (ADDYY) to avoid accusations of a conflict of interest.

He instructed Credit Lyonnais to handle the sale for him. The bank sold Adidas for just under €318 million ($332 million) the following year to a group of buyers, including a subsidiary of Credit Lyonnais. A year later, Adidas was sold again, this time for €533 million, netting the bank a large profit.

Tapie sued, claiming he'd been defrauded. By the time the case came to court, Credit Lyonnais was collapsing and the French state had taken over its liabilities. So Tapie pursued his claim against the government for a decade until a court awarded him €135 million in damages.

That ruling was overturned on appeal. But rather than leave Tapie to fight on in court, Lagarde decided to refer the matter to arbitration. A special panel of judges awarded Tapie €293 million, plus interest, just months later.

-- Jim Bittermann and Océane Cornevin contributed reporting.</s>Christine Lagarde looked to be safe in her role as the International Monetary Fund’s managing director on Monday night after its board gave her its backing, just hours after she was convicted of “negligence” over a huge payout to a business tycoon while she was French finance minister.

The IMF board praised the “wide respect and trust” for Mrs Lagarde’s leadership as it expressed its “full confidence” in her ability to continue in the role at the upper echelons of international finance.

France’s Court of Justice of the Republic, a special tribunal for ministers, earlier chose not to punish Mrs Lagarde or give her a criminal record. She had faced a one-year term and a €15,000 (£13,000) fine, threatening to derail her career.

Mrs Lagarde, who has maintained her innocence throughout the process, said she was “not satisfied” with the verdict but would not appeal against the decision. “There is a point in time when one has to just stop, turn the page and move on, and continue to work with those who have put their trust in me,” she said.

The ruling came after a week-long trial in which she received a rough ride. Ms Lagarde had maintained her innocence, and the prosecutor had asked for an acquittal over the "very weak" case after advising against bringing it to court in the first place.

Proceedings centred on Ms Lagarde's 2007 decision to allow a dispute over flamboyant magnate Bernard Tapie's sale of the Adidas sports brand to Credit Lyonnais bank to be resolved by a rarely-used private arbitration panel, instead of through the courts.</s>“She has been a very effective leader,” said Edwin M. Truman, a specialist in international finance formerly at the Federal Reserve and the United States Treasury. “Yes, there are big questions about the fund’s future. But for her to have to step down now — well, that would be complicated.”

Jacob J. Lew, the Treasury secretary, expressed the Obama administration’s support for Ms. Lagarde, saying that “she is a strong leader of the I.M.F., and we have every confidence in her ability to guide the fund at a critical time for the global economy.”

For the Trump administration, “I don’t think this kind of ethical question is likely to be the highest priority,” Mr. Truman said. While the I.M.F. and other global institutions did not figure in the presidential debate, Mr. Trump repeatedly criticized a “global power structure” that fixed the economy against workers.

“At bottom, it’s all about French politics,” Mr. Truman said.

Members of the I.M.F. board were well aware that Ms. Lagarde was facing trial in her native France over allegations that occurred when she was the finance minister in the administration of Nicolas Sarkozy.

The consensus among the directors was that Ms. Lagarde’s transgressions occurred when she was not at the fund — in contrast to those of her predecessor, Dominique Strauss-Kahn — and since taking charge in 2011, she had proved to be a leader capable of presenting a softer side of the fund while fighting hard to bolster its legitimacy in the aftermath of the financial crisis.

More so than her predecessors, Ms. Lagarde has pushed the fund to be more aggressive in taking up the cause of women and focusing attention on growing issues of inequality around the world.

Over the last year and a half, she has also led a forceful public critique of Europe’s refusal to offer Greece debt relief in return for the difficult economic changes the country has been making.</s>The International Monetary Fund chief Christine Lagarde kept her job and escaped punishment on Monday despite a conviction on negligence charges by French judges over a state payout made while she served as France’s finance minister in 2008.

The Washington-based IMF executive board reaffirmed its full confidence in Lagarde’s abilities to perform her duties leading the Fund, hours after the verdict was issued in Paris.

“The Executive Board looks forward to continuing to work with the Managing Director to address the difficult challenges facing the global economy,” the board said in a statement.

In Monday’s ruling, the judges did not find negligence in Lagarde’s decision to seek an out-of-court settlement with tycoon Bernard Tapie. But they said her failure to contest the award to him of about 400 million euros ($417 million) was negligent and led to a misuse of public funds.

“The context of the global financial crisis in which Madame Lagarde found herself in should be taken into account,” Martine Ract Madoux, the main judge on the case, said in explaining the absence of any sentence.

She also cited Lagarde’s good reputation and international standing as reasons why the court did not order a punishment. The charge against Lagarde could have carried a sentence of up to a year in prison.

Lagarde, whom IMF members reappointed in February, has won respect from global finance leaders for pushing governments to do more to boost economic growth and helping to include China’s yuan in the fund’s currency basket.

Lagarde’s lawyer, Patrick Maisonneuve, said immediately after the ruling that his team would look into appealing the decision. Though an appeal could clear her name, it could also turn out worse for Lagarde.

“Since Madame Lagarde was not sentenced, I wonder about whether to appeal or not to the highest court,” Maisonneuve told reporters outside the court.

Lagarde, who described the case as a five-year ordeal, argued in the trial last week that she had acted in good faith, and with the public interest in mind.

She said she had signed off on the arbitration – against the advice of some Finance Ministry officials – to end a costly 15-year-old legal battle between the government and Tapie, a supporter of then-President Nicolas Sarkozy.

The case dates back to when Tapie sued the French state for compensation after selling his stake in sports company Adidas to then state-owned Credit Lyonnais in 1993.

He accused the bank of defrauding him after it resold its stake for a much higher price. With the case stuck in the courts, the two sides agreed to a private settlement and Tapie was awarded a 403 million euro payout, including interest and damages.

The case was only the fifth ever heard by a special French court created in 1993 to try government ministers. The court of 15 judges, including 12 lawmakers, has never handed down a firm prison sentence.</s>International Monetary Fund Managing Director Christine Lagarde makes a statement after the IMF's Executive Board reaffirmed it's full confidence in her, in Washington on Monday. A special French court has declared Ms. Lagarde guilty of criminal negligence in a long-running arbitration case. | Photo Credit: AP

The International Monetary Fund said on Monday it retains “full confidence” in Christine Lagarde's ability to continue to lead the organization, despite her conviction for negligence in a French court.

The Fund's Board met in the wake of the court decision finding her guilty in a 2008 case dating back to her tenure as French Finance Minister. It took into account all factors including her “outstanding leadership of the Fund and the wide respect and trust for her leadership globally.”

“In this context, the Executive Board reaffirms its full confidence in the Managing Director's ability to continue to effectively carry out her duties,” the board said in a statement.

“The Executive Board looks forward to continuing to work with the Managing Director to address the difficult challenges facing the global economy.”

Ms. Lagarde told reporters shortly after the IMF statement that while she was not satisfied with the court decision, she would not appeal.

“There comes a point in time when one just has to stop, turn the page, and move on and continue to work with those who have put their trust in me,” Ms. Lagarde said. “I will put all my energies and enthusiasm into this role.”

She also thanked the board and IMF staff for their support during a “painful” process.

The French government earlier on Monday expressed its confidence in Ms. Lagarde continuing at the helm of the IMF, and U.S. Treasury Secretary Jacob J. Lew issued a statement of support immediately after the Board decision.

“The United States joins the IMF Executive Board in reaffirming our full support of Managing Director Lagarde,” Mr. Lew said. “She is a strong leader of the IMF, and we have every confidence in her ability to guide the Fund at a critical time for the global economy.”

The French court found Ms. Lagarde guilty of negligence over a massive payout to the tycoon Bernard Tapie in 2008, but she will not be fined or face prison, nor will the decision create a criminal record.

The case stemmed from Ms. Lagarde's decision in 2007 to allow a dispute over sale of the Adidas sports brand to the state-owned Credit Lyonnais bank to be resolved by a private arbitration panel, and then failing to challenge the result.

The court cleared her of negligence over her decision to refer the matter to arbitration but upheld the charge over her failure to contest the award.

She noted that the public prosecutor had sought to have the charges dismissed.

The case was another instance of controversy surrounding an IMF Managing Director. Ms. Lagarde was named to lead the organization in July 2011 after her predecessor Dominique Strauss-Kahn, also a former French Finance Minister, was forced to resign amid a sex scandal.

And his predecessor, former Spanish Economy Minister Rodrigo Rato, is facing prosecution in Spain for embezzlement during his time as a banker.

The first woman to head the IMF, Ms. Lagarde presided over some of the worst of the fallout from the 2008 financial crisis and is in her second term as Managing Director.

She was reappointed in February, despite the ongoing legal troubles.</s>Update: The IMF says in a statement following the Lagarde news that its board will meet shortly to consider the conviction.

“The executive board has met on previous occasions to consider developments related to the legal proceedings in France,” IMF spokesman Gerry Rice says in e-mail, and adds that “It is expected that the board will meet again shortly to consider the most recent developments”:

International Monetary Fund Managing Director Christine Lagarde was found guilty of one count of negligence by a French court today, according to Bloomberg News. She was accused of failing to prevent a massive government payout to businessman Bernard Tapie eight years ago, while serving as France’s finance minister, but most surprising, she will face no fine or jail sentence.

Ms. Lagarde was on trial on allegations of negligence stemming from her role nearly 10 years ago settling a dispute between the French state and business tycoon Bernard Tapie. The verdict is a blow to the IMF chief who had said Friday that the trial would end a five-year “ordeal” for her family and former colleagues.

The conviction places both Ms. Lagarde and the IMF in a bind after the fund approved a second term for her as managing director earlier this year. However, it doesn’t necessarily mean the IMF will have to eject Ms. Lagarde from her post, where she has won broad international support among both the fund’s largest shareholders, and its smaller members.

Some more details from Bloomberg:

International Monetary Fund chief Christine Lagarde convicted of one count of negligence by Paris court over her handling of a multi-million dispute when she was France’s finance minister.
• 60-year-old IMF managing director convicted at the Cour de Justice de la Republique, over events that occurred nearly a decade ago
• Lagarde was negligent in 2008 decision not to appeal arbitration, judge says
• Lagarde decided in mid-2008 not to appeal a 285 million-euro ($303-million) arbitration award for businessman Bernard Tapie that led to a massive government payout
• Lagarde was cleared of second count related to her 2007 decision to take Tapie dispute to arbitration
• Case stems from former state-owned bank Credit Lyonnais’s disagreement with Tapie over the 1993 sale of Adidas AG, which he owned

The IMF has just issued a brief statement:

Of course, this wouldn’t be the first time that an IMF head has been “sacrificed” for the greater good: recall the impressive framing of Lagarde’s predecessor Dominique Strauss-Khan, who from frontrunning French presidential candidate, suffered a political and career trainwreck overnight when he allegedly raped a maid at a NYC hotel.</s>IMF head Christine Lagarde was on Monday found guilty of negligence by a French court over a massive payout to a tycoon when she was finance minister, but will not be fined or face prison.

Ms Lagarde was found to be at fault for failing to challenge a 404-million-euro ($422 million) compensation payout to businessman Bernard Tapie over the sale of the Adidas sports brand to Credit Lyonnais bank.

Ms Lagarde, who was France’s finance minister between 2007 and 2011, was not in the Paris court to hear the decision because she is in Washington, where the International Monetary Fund is based, her lawyer said.

The 60-year-old was tried by the Court of Justice of the Republic, a tribunal staffed by judges and members of parliament that hears cases against French ministers accused of wrongdoing in office.

In Washington, an IMF spokesman said the agency’s board would meet shortly to discuss the verdict.</s>Christine Lagarde is a high-flying former lawyer who rose to become the first woman to lead the International Monetary Fund but who may find her stellar career blemished by a conviction for negligence.

She started a second five-year term as the organisation's managing director in February and has won plaudits for her handling of the Greek financial crisis.

But her conviction in Paris Monday for failing to challenge a 404-million-euro ($422 million) award to flamboyant French businessman Bernard Tapie in 2008 over the sale of sportswear brand Adidas is a setback.

However, in what might prove crucial for Lagarde's IMF future, the court ruled she will not be fined or face a jail sentence.

Her woes strike at the core of another of her tasks: restoring morale at the institution after both of her predecessors suffered legal problems.

Before the trial, Lagarde, usually impeccably dressed in luxury French brands, dismissed the prosecution over the case of Tapie as "political". The court that tried her is staffed by judges and parliamentarians and hears the cases of former or serving French ministers.

The case is a stain on an otherwise stellar international career in business, government and finance that has seen her break through barriers as a woman.

She was the first female chairman of a major global law firm — the US-based Baker and McKenzie — and was France's first woman economy minister when named by then president Nicolas Sarkozy in 2007.

The divorced mother of two sons, who is in a relationship with entrepreneur Xavier Giocanti, took over the reins of the IMF in 2011, overseeing the giant organisation which lends money to stricken countries and monitors the international financial system.

Economist Desmond Lachman, a former IMF official, recalls that "there are many instances of Ms. Lagarde's courageous truth-telling" — often as the only women in the room.

This once included scolding her successor as French finance minister, Pierre Moscovici, who fell asleep during one of many crisis meetings on her watch at the IMF.

The stamina of the former synchronised swimmer, who represented France as a schoolgirl, is legendary and she says she gave up drinking alcohol 15 years ago to improve her performance.

When not attending international summits, negotiating bailout programmes for bankrupt countries or crunching data at the IMF headquarters, she likes to relax on a farm she owns in northern France.

Born to middle-class teacher parents, she went to school in the northern port city of Le Havre before going on to study at universities in France and the US.

During her time at the IMF, Lagarde has worked to increase the influence of emerging countries, particularly China, and has taken part in bailout talks for Greece and Ukraine.

She is a staunch defender of the international trade system and has spoken out about the dangers of rising nationalism and a "populist backlash" around the world.

She said in September that globalisation "has to benefit all, not a few", but argued that the fruits of a connected world were severely undersold by politicians.</s>Christine Lagarde will remain head of the International Monetary Fund despite being convicted of negligence in a case dating to her tenure as France’s finance minister.

The IMF’s executive board said it had “full confidence” in Lagarde’s ability to carry out her duties at the head of the Washington-based international lending agency.

After a week-long trial, France’s Court of Justice of the Republic on Monday found Lagarde guilty of one count of negligence but spared her jail time and a criminal record.

The 60-year-old IMF leader had potentially faced a year of imprisonment and a fine for not seeking to block a fraudulent 2008 arbitration award to a politically connected tycoon when she was finance minister.

Lagarde thanked the board for the vote of confidence “in my ability to do my job”. She said she would not appeal against the French court’s decision.

“I am not satisfied with it, but there’s a point in time when one must stop, turn the page and move on,” she said.

Lagarde, a lawyer, became France’s first female finance minister in 2007, overseeing the country’s response to the financial crisis that rocked the global economy from 2008. She is also the first woman to head the IMF.

“She is a strong leader,” US Treasury Secretary Jacob Lew said after the board’s decision. “And we have every confidence in her ability to guide the fund at a critical time for the global economy.”

The Court of Justice of the Republic is a special tribunal to hear cases of alleged criminality by ministers in office and is made up of three judges and 12 parliamentarians.

It ruled that Lagarde’s negligence in her management of a long-running arbitration case involving tycoon Bernard Tapie helped open the door for the fraudulent misappropriation of public funds. Lagarde herself was not accused of fraud.

The case revolves around a 403 million-euro (£337 million) arbitration award given to Mr Tapie in 2008 over the botched sale of sportswear giant Adidas in the 1990s.

Civil courts have since quashed the unusually generous award, declared the arbitration process and deal fraudulent and ordered Mr Tapie to refund the money.

The special court’s presiding judge, in reading the verdict, said Lagarde should have asked her aides and others for more information about the “shocking arbitration award”.

In deciding not to sentence Lagarde, the court noted that the award to Mr Tapie has since been annulled, sparing damage to the public purse. It also noted that Lagarde was busy at the time with the global economic crisis.

Lagarde’s “personality and national and international reputation” also counted in her favor in the decision not to punish her, the court ruled.

Lagarde, who was not present for the verdict, maintained her innocence through the trial. The prosecutor had asked for an acquittal in the case, which began in 2011.

The special court acquitted Lagarde of negligence in her original decision to put the Tapie case to arbitration. But it found her guilty in a subsequent decision not to contest the amount of the arbitration award.

The legal battle between Mr Tapie and Credit Lyonnais over the public bank’s sale of his Adidas stake was still unresolved when Lagarde took over at the Finance Ministry in 2007.

Lagarde ordered that the dispute be settled through a private arbitration panel, instead of regular courts. The massive award raised questions about whether Mr Tapie benefited from his political connections, including with then-President Nicolas Sarkozy, Lagarde’s boss when she was his finance minister.</s>Christine Lagarde, the managing director of the International Monetary Fund (IMF), was found guilty yesterday of criminal charges linked to the misuse of public funds during her time as France’s finance minister, a verdict that could force her out of her post, reported the New York Times.

Ms. Lagarde, who began her second five-year term at the IMF in February, faces a fine of up to 15,000 euros, or $15,700, and up to one year in jail.

The scandal has overshadowed her work at the fund, to which she was appointed in 2011, after Dominique Strauss-Kahn resigned as managing director when he was accused of having sexually assaulted a maid in a New York City hotel.

The move is likely to destabilise the IMF while it faces a host of thorny issues, including questions over its participation in a multibillion-dollar bailout for Greece and uncertainty about the United States’ role in the organisation once Donald J. Trump becomes president in January.

The IMF board had also been preparing for a possible conviction with people close to major shareholders, saying that in the absence of a prison term — and with continuing support from the French government — Ms Lagarde would probably be able to stay in her position.

The IMF said in a statement after the verdict that the board, which has met previously to consider the case, was expected to “meet again shortly to consider the most recent developments”.
A court in Paris finds International Monetary Fund Managing Director Christine Lagarde guilty of negligence in a 404 million euro "misuse of public funds" case. The court ruled that Lagarde won't be fined, won't serve any jail time, or receive a criminal record. The IMF Executive Board "looks forward to continuing to work with" her.