F acing trial seemingly ranks just below financial superhero on the job description for managing director of the International Monetary Fund. Dominique Strauss-Kahn resigned after being accused of attempted rape in 2011 (the charges were dropped) and was acquitted of “aggravated pimping” last year. His predecessor, Rodrigo Rato, is currently in court for allegedly misusing funds while head of Bankia, a Spanish lender.
This week came the turn of the current commander-in-chief, Christine Lagarde, who is accused of negligence in her former role as French finance minister. The charges relate to her decision, fresh to the post in 2007, to let a dispute between the government and businessman Bernard Tapie be settled by arbitration, and to the green light she gave when it awarded him a mega €403 million ($421 million) state payout.
Mr. Tapie had sued Crédit Lyonnais, a partly state-owned bank hoovered up by Crédit Agricole in 2005, over advice it gave when buying sports outfit Adidas from him in 1993. The decision to reach a rare out-of-court settlement raised eyebrows because he had supported Nicolas Sarkozy’s successful presidential campaign in 2007.
Ms. Lagarde is not accused of corruption. Instead, the judges suggest she accepted too readily the decision to hand over taxpayer money (which Mr. Tapie has since been ordered to repay with interest), against the advice of her officials. In court, she depicted herself as a political novice swamped with so much paperwork that she did not have time to read a key internal memo from August 2007.
She turned the spotlight onto Stéphane Richard, her former chief-of-staff and now CEO of Orange, saying he had handled the case. He is subject to a separate embezzlement investigation, also related to L’Affaire Tapie.
The maximum punishment for Ms. Lagarde is a year in prison and a €15,000 fine. The case is being heard in the same courtroom where the Revolutionary Tribunal condemned Marie Antoinette to the guillotine in 1793. For the time being, the IMF is standing by her. But if she is convicted it is hard to see it keeping its head.