French magistates and anti-fraud police have raided the Paris home of the International Monetary Foundation (IMF) chief, Christine Lagarde, as part of an investigation into alleged misuse of public office and "embezzlement" when she was French finance minister in 2008.
Ms Lagarde, 57, was not in France at the time.
Her lawyer, Yves Repiquet, said that he believed that the search would “help to reveal the truth and exonerate my client from all criminal responsibility”.
The investigation concerns the payment of almost €400m in state compensation to a disgraced French tycoon, Bernard Tapie, in 2008. Three French magistrates are investigating allegations that Ms Lagarde acted improperly when she created an independent panel to end a legal dispute over the sale by a state-owned bank of Mr Tapie’s holding in the Adidas sportswear company, in 1993.
Mr Tapie was jailed in 1997 after being found guilty of a number of offences including the fixing of a football match involving the club that he owned at the time, Olympique Marseille. Once a left-wing activist and minister, Mr Tapie switched sides after he left prison to back Nicolas Sarkozy in the 2007 presidential election.
The magistrates are investigating allegations that Ms Lagarde, as finance minister, intervened improperly to ensure that Mr Tapie received high compensation for what he claimed was incompetent handling of the Adidas sale by Credit Lyonnais. In 2011, Ms Lagarde was appointed as head of the IMF after rape allegations (since dropped) forced the resignation of another former French finance minister, Dominique Strauss-Kahn.
Ms Lagarde is expected to be questioned by investigating magistrates in the near future.
It is alleged that Mr Tapie was given a sweetheart deal in return for his high-profile support for Mr Sarkozy in the 2007 presidential election. An anonymous letter on the case, sent on finance ministry notepaper, suggests that the real responsibility for the decision which rebuilt Mr Tapie’s fortune lay with President Sarkozy.