By LIZ ALDERMAN

Published: August 4, 2011

PARIS — A French court ordered an investigation Thursday into charges that the International Monetary Fund’s new managing director, Christine Lagarde, abused her authority in a 2007 dispute involving a multimillion-dollar payout to a French tycoon while she was the finance minister of France.

The ruling by the Court of Justice of the Republic, which oversees the actions of French ministers, means that Ms. Lagarde may have to gird for a possibly lengthy legal process to defend against the criminal charge.

But legal experts said it was unlikely to interfere with her management of the fund, which was aware before her appointment that an investigation could be called.

“She should be able to continue her duties with no problem because the I.M.F. was made aware of this potential investigation when she submitted her candidature, and they voted for her nonetheless,” said Christopher Mesnooh, a partner specializing in international business law at Field Fisher Waterhouse in Paris.

A lawyer for Ms. Lagarde, Yves Repiquet, said the procedure was “in no way incompatible with the current functions of the managing director of the I.M.F.,” Reuters reported.

An I.M.F. spokesman did not immediately return calls for comment.

Ms. Lagarde ushered in a new era at the I.M.F. in June, becoming the first woman to take on one of the world’s top positions in finance after Dominique Strauss-Kahn stepped down to deal with allegations that he sexually assaulted a hotel maid in New York.

Her contract contains a section on conduct and ethics that requires her to “strive to avoid even the appearance of impropriety.” Given that she was up front about the matter when applying for the I.M.F. job, “no one could come back and say now you have to take leave or resign — that would be indefensible,” Mr. Mesnooh said.

At issue in the French court case is whether Ms. Lagarde abused her authority as finance minister in a long-running legal soap opera.

In 2007, she ordered that a dispute between Bernard Tapie, a flamboyant French businessman and a friend of President Nicolas Sarkozy, and Crédit Lyonnais, a state-owned bank, be referred to an arbitration panel. The panel ultimately awarded Mr. Tapie a settlement of about $580 million, including interest.

Mr. Tapie, a former head of the Adidas sports empire and a former Socialist minister who changed political loyalties to support Mr. Sarkozy’s 2007 presidential campaign, accused Crédit Lyonnais in 1993 of bilking him when it oversaw the sale of his stake in Adidas.

The scandal-ridden bank was effectively put into state hands, and when Mr. Strauss-Kahn was finance minister in 1999, he ruled that the state was responsible for dealing with Mr. Tapie’s claim.

But it was Mr. Sarkozy who later suggested that the finance ministry, which by then was headed by Ms. Lagarde, move the case to arbitration.

Ms. Lagarde has defended her role numerous times in the case, at one point declaring the allegations to be a smear campaign and vowing that she acted with “rigor and transparency” to keep the dispute from increasing costs to taxpayers.

The case could drag on as investigators pore through documents. The charge comes with a theoretical penalty of 75,000 euros and five years in prison.

http://www.nytimes.com/2011/08/05/business/global/imf-chief-to-face...