Lagarde in French Spotlight as Negligence Trial Begins

Christine Lagarde heads to court Monday in a case that promises to gain attention in France but is unlikely to have much bearing on her job as managing director of the International Monetary Fund.

Lagarde, 60, will stand trial on charges of negligence before a special panel that includes judges and French lawmakers. She is accused of failing to prevent a massive government payout to businessman Bernard Tapie eight years ago, while serving as France’s finance minister. Lagarde, who has denied the charges, could learn the verdict as early as Friday or the hearing may continue into next week.

“Negligence is a non-intentional offense,” Lagarde said in a recorded interview that France 2 ran on Sunday evening, adding she was “confident and determined” heading into court. “We’re all negligent at something at one point or another in our lives. I tried to do my work the best I could within the limits of what I knew.”

Lagarde in the interview denied having favored Tapie or acting on orders of Nicolas Sarkozy, who was France’s president when Lagarde was finance minister.

As the head of the IMF, Lagarde manages an institution that was on the front lines of the effort to combat the global financial crisis and provides billions of dollars in loans to countries at risk of default. She’s also a prominent voice in debates about the global economy at Group of 20 meetings and other international forums.

A conviction of negligence charges carries a maximum penalty of one year in prison and a fine of 15,000 euros ($16,000).

The IMF’s member countries knew about Lagarde’s legal issues in the long-running Tapie case when she was first appointed in 2011, and are therefore unlikely to lose confidence in her regardless of the outcome of the trial, said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

“The only impact is if she’s found guilty and incarcerated,” said Truman, a former assistant secretary of the U.S. Treasury. “Otherwise, I don’t think it’ll make much difference.”

Lagarde started a second, five-year term in July after no candidates emerged to challenge her. The terms of her 2011 appointment say she must avoid “even the appearance of impropriety.”

IMF chief spokesman Gerry Rice said last week that the executive board has been briefed on the matter and continues to support Lagarde.

The Cour de Justice, a court created in 1993 specializing in ministerial misconduct, is made up of three professional judges and 12 lawmakers. A handful of ministers have stood trial before the court, including current Environment and Energy Minister Segolene Royal in a defamation case and Laurent Fabius in relation to the distribution of contaminated blood when he was prime minister. Both were cleared.

Lagarde is accused of failing to block an arbitration process in 2008 that brought to an end a longstanding dispute between former state-owned bank Credit Lyonnais and Tapie. Tapie walked away with an initial award of about 285 million euros before it was cut to zero by an appeals court.