Christine Lagarde, head of the International Monetary Fund, has been found guilty of negligence for failing to challenge a €404 million payout to a businessman when she served as finance minister of France eight years ago.
The special court that convicted Ms Lagarde, 60, dispensed with a punishment and said that the offence would not give her a criminal record.
The judges, who included three professionals and 12 parliamentarians, rejected Ms Lagarde’s argument that she had acted in good faith when she had failed to challenge the huge financial handout awarded in 2008 by arbitrators to Bernard Tapie, a tycoon. “This was not an unfortunate political decision but negligence,” the ruling said. The judges said that they were not applying any sentence because they took into account Ms Lagarde’s international reputation. She attended the trial last week but was back in Washington yesterday. She could have faced a maximum of one year in prison and a €15,000 fine.
The verdict, depicted by Ms Lagarde’s supporters as symbolic, nevertheless raised questions about her future as managing director of the IMF. Its board of directors was meeting last night to consider a response.
The judges also rejected an appeal by the chief prosecutor on Friday not to convict Ms Lagarde, who served in the cabinet of President Sarkozy from 2007 to 2011. That year she replaced Dominique Strauss-Kahn, another former French finance minister, who resigned in disgrace while facing sexual assault charges — later dropped — in New York.
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The decision of the court, a special tribunal for trying people for actions while serving in government, was not a shock because Martine Ract Madoux, the presiding judge, threw Ms Lagarde on the defensive with fierce and sceptical questioning throughout the trial last week. The crux of the case came down to Ms Lagarde’s acceptance of arbitration to settle a longstanding conflict between the state and Mr Tapie over his previous ownership of the adidas sportswear company. Mr Tapie was claiming compensation for the takeover of adidas in the 1990s by Credit Lyonnais, a state-owned bank at the time.
When the panel ruled on the €404 million award, senior officials at Ms Lagarde’s ministry urged her to appeal against what to them seemed an outrageously high sum. Ms Lagarde, a lawyer by profession, indicated in testimony that the case had been handled at a political level, with Mr Sarkozy’s involvement, and that she had merely signed it off.
An appeal against the ruling was made years later and won. Mr Tapie has been ordered to pay back the funds and several former officials, including Stéphane Richard, Ms Lagarde’s chief of staff at the time, now face charges of aggravated embezzlement. Prosecutors suspect that the arbitration panel was biased under a deal to reward Mr Tapie for his support for Mr Sarkozy’s election campaign in 2007. Investigating judges have yet to decide whether to send any of the suspects to trial.
Bruno Bézard, the senior official responsible for state assets, told the court that he had pleaded with Ms Lagarde to oppose the award. “Faced with such an outrageous decision, even if we only had a one-in-a-thousand chance of winning, we had to do it,” he said.
Summing up on Friday, Jean-Claude Marin, the chief Paris prosecutor, told the judges: “Taking a bad decision is not a criminal offence . . . You have to decide the fine line between politics and legal liability.”
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Patrick Maisonneuve, Ms Lagarde’s lawyer, said that Ms Lagarde was disappointed by what he called a partial guilty verdict. “We would have preferred a complete acquittal but the court did decide there would be no criminal record.” Ms Lagarde was deciding whether to appeal to the court of cassation, the highest court, which can ajudicate only on legal matters, not the substance of the case.
The IMF board is considering whether Ms Lagarde’s conviction, even in the absence of a penalty, would damage the fund’s reputation.