Abuse of power?

A French court ruled on Thursday that Christine Lagarde, managing director of the International Monetary Fund (IMF), should be formally investigated for her role in settling a financial dispute while she was France's finance minister.

The allegations stem from a dispute between Bernard Tapie, a friend of President Nicolas Sarkozy, and a bank, Credit Lyonnais, which used to be owned by the state. Tapie accused the bank of selling his share in the German sportswear manufacturer Adidas, and a lengthy legal battle ensued.

However, shortly after Lagarde became finance minister in 2007, she sent the case to arbitration, where Tapie was awarded 285 million euros ($407 million).

The investigation will center around Lagarde's decision to send the case to arbitration in the first place, and for allowing such a large sum to be awarded. She has been accused of exceeding her authority as finance minister.

The inquiry could lead to charges which could lead to a prison sentence, but the case is expected to take years.

Lagarde has denied any wrongdoing and, for now, will continue her duties as head of the IMF. She replaced Dominique Strauss-Kahn at the fund in June after he was forced to step down in the wake of sexual assault charges.

Author: Matt Zuvela (dpa, Reuters)
Editor: Michael Lawton