IMF chief Lagarde facing French trial over payout to tycoon

International Monetary Fund (IMF) chief Christine Lagarde was ordered to stand trial over her handling of a massive state payout to French tycoon Bernard Tapie when she was finance minister. Lagarde was placed under formal investigation in 2014 for negligence in a protracted legal drama pitting Tapie against a bank which he accused of defrauding him during his sale of sports clothing giant Adidas in the 1990s. The 59-year-old Frenchwoman was finance minister under former president Nicolas Sarkozy in 2008 when she decided to allow arbitration in the dispute between Tapie and partly state-owned Credit Lyonnais.

The arbitration resulted in Tapie, who had close ties to Sarkozy, being awarded a payout of 403 million euros (USD 433 million), which would have to be covered by a state-run body in charge of settling the bank's debts. French prosecutors in September called for the case against Lagarde to be dropped. But investigating judges decided to send her to trial, a legal source told AFP.

The negligence charge comes over Lagarde's failure to challenge the award, which was hugely beneficial to Tapie but prejudicial to the state. Lagarde has denied wrongdoing or that she acted on Sarkozy's orders. In a statement today she said she would appeal the decision which she described as "difficult to understand".

Lagarde said she had "always acted in the interests of the state and the law." The IMF's executive board, representing 188 member nations, "continues to express its confidence in the managing director's ability to effectively carry out her duties," spokesman Gerry Rice said. French Finance Minister Michel Sapin said Lagarde should remain in her post because "she is presumed innocent." The scandal is not the first to taint the top office of the financial institution. Its former French chief Dominique Strauss-Kahn was forced to step down in 2011 after being accused of sexual assault by a New York hotel maid.

Criminal charges against him were dropped and the case was settled in a civil suit. Investigating judges have been probing whether the arbitration was a "sham" organised to reward Tapie for his support of Sarkozy. The arbitration decision itself was overturned in February after years of court proceedings.