IMF chief avoids charges in French payout scandal

Head of the International Monetary Fund (IMF), France's Christine Lagarde speaks to the press as she leaves the French Republic Justice Court. (AFP/Jacques Demarthon)

PARIS: IMF chief Christine Lagarde avoided immediate charges Friday but was named an "assisted witness" after French prosecutors grilled her for two days over a state payout to a disgraced tycoon when she was finance minister.

Lagarde was questioned for a total of 24 hours by prosecutors working for a court that probes cases of ministerial misconduct over her 2007 handling of a row that resulted in 400 million euros being paid to controversial business figure Bernard Tapie.

"My status as assisted witness is not a surprise," she told reporters as she left the Paris courthouse late on Friday.

"I have always acted in the best public interest and in accordance with the law," said Lagarde, 57, who has consistently denied any wrongdoing.

"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.

While Lagarde avoided being placed under formal investigation -- the closest equivalent in French law to being charged -- her "assisted witness" status means she could still face further questions -- and possibly charges -- at a later stage.

Lagarde said she would now return to Washington and report to the board of the International Monetary Fund, which again expressed confidence in its first woman leader after learning of the court's decision.

Lagarde, considered one of the world's most powerful women, won respect as France's first female finance minister for her no-nonsense attitude, intellect and style.

Criminal charges against Lagarde would have been an embarrassment for the IMF, after her predecessor Dominique Strauss-Kahn, also from France, resigned in disgrace in 2011 over an alleged assault on a New York hotel maid.

"The board will be briefed again in the coming days," IMF spokesman Gerry Rice said in a statement on Friday.

"The Executive Board has been briefed on this matter several times and on each occasion expressed confidence in the managing director's ability to effectively carry out her duties," he added.

The investigation concerns Tapie, a former politician, who went to prison for match-fixing during his time as president of French football club Olympique de Marseille.

Prosecutors working for the Court of Justice of the Republic (CJR) suspect he received favourable treatment in return for supporting Nicolas Sarkozy in the 2007 presidential election.

They have suggested Lagarde -- who at the time was finance minister -- was partly responsible for "numerous anomalies and irregularities" which could lead to charges for complicity in fraud and misappropriation of public funds.

The investigation centres on her 2007 move to ask a panel of judges to arbitrate in a dispute between Tapie and Credit Lyonnais, the collapsed, partly state-owned bank, over his 1993 sale of sports group Adidas.

Tapie had accused Credit Lyonnais of defrauding him by consciously undervaluing Adidas at the time of the sale and argued that the state, as the former principal shareholder in the bank, should compensate him.

His arguments were upheld by the arbitration panel but critics claimed the state should not have taken the risk of being forced to pay compensation to a convicted criminal who, as he was bankrupt at the time, would not have been able to pursue the case through the courts.

The payment Tapie received enabled him to clear his huge debts and tax liabilities and, according to media reports, left him with 20 million to 40 million euros which he has used to relaunch his business career.

Tapie, who recently purchased a newspaper group in the south of France and has acquired a luxury yacht, a Bombardier jet and several top properties in the south of France and Paris, said in an interview Friday that he had "less than 100 million euros" from the payout if one deducted the taxes he paid and what he owed his creditors.

"About the sum, I can affirm... that Christine Lagarde had saved the state several billion euros by opting for arbitrage," he told Le Parisien newspaper.

Lagarde has said the arbitration was necessary to put an end to a costly dispute, and has always denied having acted under orders from Sarkozy.