A court in France will investigate International Monetary Fund (IMF) chief Christine Lagarde on allegations she abused her authority when she served as the French finance minister.

The development comes only one month after she took over as IMF boss, succeeding Dominique Strauss-Kahn, who was forced to resign in wake of his sexual assault trial in New York City.

The case has to do with a 285-million euro ($406-million) payment she had approved to a French businessman named Bernard Tapie, a former government minister who went against his Socialist party to support conservative Nicholas Sarkozy during the 2007 presidential elections.

During that period, Tapie was involved in litigation against the Credit Lyonnais, accusing the bank of having defrauded him in 1993 when he sold his investment in the Adidas sports apparel company.

After losing his case in France’s highest court, Tapie appealed.
Eventually, Lagarde, as finance minister, intervened and persuaded the bank and Tapie to enter into a binding arbitration agreement. Tapie walked away with 285-million euros as a result.

A group of Socialist MPs asked Supreme Court prosecutor Jean-Louis Nadal to investigate the legality and ethics of Lagarde pushing the case into arbitration rather than letting the affair be decided by the courts. They also question Lagarde’s refusal to heed expert advice on appealing the massive payout Tapie received.

Lagarde has denied any misconduct on her part. There is no evidence that she benefitted financially in any way from the Tapie matter.