IMF chief Christine Lagarde
Photograph by MANDEL NGAN AFP/Getty Images

If she's convicted, her position would be in jeopardy.

By Laura Cohn
December 12, 2016

On the eve of her trial for alleged negligence over a $425 million government payout to a French tycoon while serving as France’s finance minister, International Monetary Fund chief Christine Lagarde sounded confident that she would be exonerated.

“Negligence is a non-intentional offense,” Lagarde, a lawyer by training, told the national public television channel France 2 on Sunday night. “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.”

Monday marked the beginning of the IMF head’s trial for alleged negligence over a multi-million-euro government payout made eight years ago to French tycoon Bernard Tapie, who was close to then-President Nicolas Sarkozy. Lagarde, whose attorney has said allegations in the long-running dispute are “without merit,” failed last July in her attempt to have the case dismissed.

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The trial is expected to run through Dec. 20. Here’s what you need to know as it kicks off:

1. The charges date back to 2008.

At issue is the French government’s 2008 payment to Tapie—a backer of Sarkozy—to settle a dispute the tycoon was having with French bank Credit Lyonnais. Tapie had sued Credit Lyonnais for its handling of the sale of his majority stake in sportswear company Adidas in the mid-1990s.

In 2007, the year Lagarde became France’s finance minister, the battle had yet to be resolved. So it fell to her, and she ordered a settlement through a private arbitration panel, as opposed to going through the regular court system. The move led to a payout from public funds, and angered the French public. Last year, a Paris court ordered Tapie to repay the money.

2. Investigators say she made a number of errors.

Judges who investigated the matter claim Lagarde, 60, made mistakes in using arbitration. They also say she erred in not challenging the deal, which suggest she was swayed by Tapie’s political ties to Sarkozy. (In the France 2 interview that aired Sunday night, Lagarde denied she was following Sarkozy’s orders.) But in their investigation, the judges wrote: “Ms. Lagarde’s behavior proceeds not only from a questionable carelessness and precipitation, but also from a conjunction of faults which, by their nature, number and seriousness, exceed the level of mere negligence.”

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3. If convicted, Lagarde could face prison and be fined.

The IMF head, if found guilty of negligence, could wind up facing as long as a year in prison and a fine of 15,000 euros ($16,000). The trial is expected to run through December 20, but it is unclear precisely when the judges will announce their ruling.

4. Yet the IMF board backs her.

Even with this case hanging over her, Lagarde was appointed to a second five-year term as managing director of the IMF back in February. Since then, the board has continued to support Lagarde, who is the first female head of the IMF and the first woman to serve as finance minister of a Group of Eight nation. But if she is convicted, her position would be in jeopardy.

5. She isn’t the first IMF head to run into legal trouble.

Lagarde’s predecessor at the IMF, Dominique Strauss-Kahn, left the organization in 2011 after being accused of sexual assault by a hotel housekeeper in New York. The criminal case was dismissed, but the civil case that the worker, Nafissatou Diallo, filed in the Bronx was settled in 2012. Before Lagarde’s trial began this week, the case threatened to draw a dark cloud over her second term at the helm of the IMF, which, after all, is an institution that prides itself on having a strong moral authority.

Indeed, Christopher Mesnooh, legal analyst and lawyer with the Paris, New York and Washington bars, told the Associated Press that the whole Tapie case is “highly political” and that the French have a “strong feeling about it” because “there is a question of public money involved.”

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