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Christine Lagarde, I.M.F. Chief, Is Found Guilty of Negligence Christine Lagarde, I.M.F. Chief, Is Found Guilty of Negligence
(35 minutes later)
The International Monetary Fund threw its support behind its leader, Christine Lagarde, on Monday despite her conviction in a French court on charges of misusing public funds.The International Monetary Fund threw its support behind its leader, Christine Lagarde, on Monday despite her conviction in a French court on charges of misusing public funds.
With international elites and their institutions facing populist criticism amid political and social change in the United States and Europe, the 24 directors of the fund decided that this was not the time to leave the I.M.F. rudderless.With international elites and their institutions facing populist criticism amid political and social change in the United States and Europe, the 24 directors of the fund decided that this was not the time to leave the I.M.F. rudderless.
Earlier on Monday, the Cour de Justice de la République, a special French court that considers cases against government officials, had found Ms. Lagarde guilty of criminal charges linked to the misuse of public funds when she was France’s finance minister nearly a decade ago. But the court did not impose a fine or sentence. Earlier on Monday, the Cour de Justice de la République, a French court that considers cases against government officials, found Ms. Lagarde guilty of criminal charges linked to the misuse of public funds when she was France’s finance minister nearly a decade ago. But the court did not impose a fine or sentence.
In a statement, the directors of the I.M.F. said on Monday that they had considered the court’s decisions and had “full confidence in the managing director’s ability to continue to effectively carry out her duties.” In a statement, the directors of the I.M.F. said they had considered the court’s decisions and had “full confidence in the managing director’s ability to continue to effectively carry out her duties.”
Yet the verdict — and it potential to tarnish Ms. Lagarde as a leader — comes at a critical juncture for the I.M.F. Yet the verdict — with its potential to tarnish Ms. Lagarde as a leader — came at a critical juncture for the I.M.F.
Founded and largely managed by Europeans and Americans, the fund now oversees a global economy where faster-growing countries like China are pushing for more of a leadership role. Founded and largely managed by Europeans and Americans, the fund oversees a global economy where faster-growing countries like China are seeking a greater role.
Ms. Lagarde is the fourth of the last six leaders to hail from France and the difficult time the I.M.F. has had in terms of foreseeing, as well as reacting to, the European debt crisis has caused some to wonder whether the time has come to appoint a non-European head. Ms. Lagarde is the fourth of the last six leaders to hail from France and the difficult time the I.M.F. has had in anticipating, as well as reacting to, the European debt crisis has caused some to wonder whether the time has come to appoint a non-European leader.
I.M.F. doctrine, which advocates free trade and austerity for countries in financial difficulties, has also been criticized as elitist and not sufficiently in tune with the populist movements sweeping the globe today. I.M.F. doctrine, which advocates free trade and austerity for countries in financial difficulties, has been criticized as elitist and not sufficiently in tune with the populist movements sweeping the globe.
For now, such longer-term concerns have taken a backseat to a more pressing view that with Britain leaving the European Union, Italy’s future in the eurozone perhaps in doubt and the possibility of global trade wars being set off by President-elect Donald J. Trump, the steady and experienced hand of Ms. Lagarde was needed more than ever. For now, the fund must confront more immediate challenges. With Britain leaving the European Union, Italy’s future in the eurozone perhaps in doubt and the possibility of global trade wars being set off by President-elect Donald J. Trump, Sthe steady and experienced hand of Ms. Lagarde was needed more than ever.
“She has been a very effective leader,” said Edwin M. Truman, a past specialist in international finance at the Federal Reserve and the U.S. Treasury. “Yes, there are big questions about the fund’s future. But for her to have to step down now — well, that would be complicated.” “She has been a very effective leader,” said Edwin M. Truman, a specialist in international finance formerly at the Federal Reserve and the United States Treasury. “Yes, there are big questions about the fund’s future. But for her to have to step down now — well, that would be complicated.”
The United States Treasury Secretary, Jacob J. Lew, expressed the Obama administration’s support for Ms. Lagarde, saying that “she is a strong leader of the I.M.F., and we have every confidence in her ability to guide the Fund at a critical time for the global economy.” The United States Treasury Secretary, Jacob J. Lew, expressed the Obama administration’s support for Ms. Lagarde, saying that “she is a strong leader of the I.M.F., and we have every confidence in her ability to guide the fund at a critical time for the global economy.”
For the Trump administration, “I don’t think this kind of ethical question is likely to be the highest priority, ” Mr. Truman said. While the I.M.F. and other global institutions did not figure in the presidential debate, Mr. Trump repeatedly slammed a “global power structure” that fixed the economy against workers. “At bottom it’s all about French politics,” Mr. Truman said. For the Trump administration, “I don’t think this kind of ethical question is likely to be the highest priority, ” Mr. Truman said. While the I.M.F. and other global institutions did not figure in the presidential debate, Mr. Trump repeatedly slammed a “global power structure” that fixed the economy against workers.
“At bottom it’s all about French politics,” Mr. Truman said.
Members of the I.M.F. board were well aware that Ms. Lagarde was facing trial in her native France over allegations that occurred when she was the finance minister for president Nicolas Sarkozy’s government.Members of the I.M.F. board were well aware that Ms. Lagarde was facing trial in her native France over allegations that occurred when she was the finance minister for president Nicolas Sarkozy’s government.
The consensus among the directors [YES?] was that Ms. Lagarde’s transgressions occurred when she was not at the fund — in stark contrast to her predecessor Dominique Strauss-Kahn — and since taking charge in 2011, she had proved to be a leader capable of presenting a softer side of the fund while also fighting hard to bolster its legitimacy in the aftermath of the financial crisis. The consensus among the directors was that Ms. Lagarde’s transgressions occurred when she was not at the fund — in stark contrast to her predecessor, Dominique Strauss-Kahn, — and since taking charge in 2011, she had proved to be a leader capable of presenting a softer side of the fund while also fighting hard to bolster its legitimacy in the aftermath of the financial crisis.
More so than her predecessors, Ms. Lagarde has pushed the fund to be more aggressive in taking up the cause of women and focusing attention on growing issues of inequality around the world.More so than her predecessors, Ms. Lagarde has pushed the fund to be more aggressive in taking up the cause of women and focusing attention on growing issues of inequality around the world.
Over the past year and a half, Ms. Lagarde has also led a forceful public critique of Europe’s refusal to offer Greece debt relief in return for the difficult economic reforms the country has been putting in place. Over the last year and a half, Ms. Lagarde has also led a forceful public critique of Europe’s refusal to offer Greece debt relief in return for the difficult economic reforms the country has been putting in place.
Nevertheless, some close followers of the fund contend that, while Ms. Lagarde may have retained the backing of her board for the moment, over the longer term, her encounter with the French legal system may have put a dent in her most valuable asset — her carefully constructed public persona. Nevertheless, while Ms. Lagarde may have retained the backing of her board for the moment, over the longer term, her French legal problems may have put a dent in her most valuable asset — her carefully constructed public persona.
“She was a breath of fresh air, someone representing true change from the past,” said Peter Doyle, a former economist at the fund and now an outspoken critic. “Now she is just another tainted European leader.”“She was a breath of fresh air, someone representing true change from the past,” said Peter Doyle, a former economist at the fund and now an outspoken critic. “Now she is just another tainted European leader.”
Those are tough words, for sure. But economists point out that the fund’s core mission of requiring financially ailing countries to reform their economies and fight corruption demands credibility and reputation of the highest order.Those are tough words, for sure. But economists point out that the fund’s core mission of requiring financially ailing countries to reform their economies and fight corruption demands credibility and reputation of the highest order.
And that starts at the top, with its leader — especially one who is as widely known as Ms. Lagarde.And that starts at the top, with its leader — especially one who is as widely known as Ms. Lagarde.
“It would be complacent if not delusional to say there will be no impact on the institution,” said Nicolas Veron, an expert on international economics at the Bruegel Institute in Brussels. “The only question is how big is the impact — and how does it compare with the need for stability.” “It would be complacent if not delusional to say there will be no impact on the institution,” said Nicolas Véron, an expert on international economics at the Bruegel Institute in Brussels. “The only question is how big is the impact — and how does it compare with the need for stability.”
Ms. Lagarde’s legal issues in France have dogged Ms. Lagarde’s work at the fund, ever since she was appointed in 2011. She took over as managing director after Dominique Strauss-Kahn resigned following accusations that he sexually assaulted a maid in a New York City hotel. Ms. Lagarde’s legal issues in France have dogged her work at the fund, ever since she was appointed in 2011. She took over as managing director after Mr. Strauss-Kahn resigned following accusations that he sexually assaulted a maid in a New York City hotel.
The case against Ms. Lagarde centered on Bernard Tapie, a former entertainer and owner of Adidas who had previously been jailed on corruption charges. Mr. Tapie accused the lender Crédit Lyonnais, in which the French state had a stake at the time, of cheating him when it oversaw the sale of his share in the sportswear empire in 1993. Years of costly legal battles ensued.The case against Ms. Lagarde centered on Bernard Tapie, a former entertainer and owner of Adidas who had previously been jailed on corruption charges. Mr. Tapie accused the lender Crédit Lyonnais, in which the French state had a stake at the time, of cheating him when it oversaw the sale of his share in the sportswear empire in 1993. Years of costly legal battles ensued.
The court did not fault Ms. Lagarde for green lighting the arbitration, but it ruled that she had been negligent for not appealing the decision. The court, noting that a judge had previously invalidated the payout to Mr. Tapie in a 2015 ruling and that she had “national and international” stature, decided not to punish Ms. Lagarde and spared her a criminal record. The court did not fault Ms. Lagarde for approving the arbitration, but it ruled that she had been negligent for not appealing the decision. The court, noting that a judge had previously invalidated the payout of 400 million euros to Mr. Tapie in a 2015 ruling and that she had “national and international” stature, decided not to punish Ms. Lagarde and spared her a criminal record.
Speaking to reporters after the hearing, Ms. Lagarde’s lawyer, Patrick Maisonneuve, said he had a “mixed” reaction to the verdict.Speaking to reporters after the hearing, Ms. Lagarde’s lawyer, Patrick Maisonneuve, said he had a “mixed” reaction to the verdict.
“On the one hand, she is found responsible, but given the circumstances, given the responsibilities that Ms. Lagarde had at the time — in 2008, we were in a major economic crisis — the court decided that it would not sentence Ms. Lagarde to anything,” he said.“On the one hand, she is found responsible, but given the circumstances, given the responsibilities that Ms. Lagarde had at the time — in 2008, we were in a major economic crisis — the court decided that it would not sentence Ms. Lagarde to anything,” he said.
Ms. Lagarde’s lawyers can appeal the verdict before France’s highest criminal court, the Cour de Cassation, on procedural grounds. But Mr. Maisonneuve suggested she might not, because no punishment was meted out.Ms. Lagarde’s lawyers can appeal the verdict before France’s highest criminal court, the Cour de Cassation, on procedural grounds. But Mr. Maisonneuve suggested she might not, because no punishment was meted out.
Ms. Lagarde did not attend the latest hearing on Monday, but was in Paris last week for the case.Ms. Lagarde did not attend the latest hearing on Monday, but was in Paris last week for the case.