IMF managing director Christine Lagarde in court over money to disgraced tycoon Bernard Tapie in 2008

Former finance minister allegedly bought Tapie's support for Nicolas Sarkozy's 2007 presidential bid

The IMF chief Christine Lagarde may be formally accused of fraud tomorrow at the end of a two day grilling by a special court in France.

Ms Lagarde, 57, spent most of today answering questions in a private hearing about her role in a €403m compensation award to the disgraced tycoon, Bernard Tapie, while she was French finance minister in 2008.

The elegant, and much admired, Ms Lagarde is accused not of enriching herself, but of engineering a sweetheart settlement to Mr Tapie  to pay him off for switching sides to support the former President Nicolas Sarkozy in the 2007 presidential election.

If, as expected,  she is “mis en examen”, or placed under formal investigation for “embezzlement” by the special court tomorrow, the International Monetary Fund (IMF) will face a tricky decision on whether or not to ask her to stand down.

An IMF spokesman in Washington indicated that the organisation had no plans, at this stage, to force the resignation of a second senior French politician in two years. Lagarde's predecessor, Dominique Strauss-Kahn, resigned in May 2011 after he was accused of the attempted rape of a hotel chamber maid in New York.

Ms Lagarde is understood to have vehemently contested the allegations against her today and insisted that she acted in the best interests of the French taxpayer.  She is said by friends to be “angry” and “bemused” that she should face such allegations in France when she is supposed to be devoting all her energies to resolving the international economic crisis.

Although the case against her is far from watertight, sources suggest that the Cour de Justice de la République – a special court which tries alleged wrongdoing in office by ministers or ex-ministers – has enough prima facie evidence to order a formal and prolonged investigation. A report by the court’s chief prosecutor, leaked earlier this week, said Ms Lagarde had taken “a series of decisions systematically damaging to the interests of the State”.

Ms Lagarde was given the whole of today and part of tomorrow to contest the allegations in a closed hearing. The likelihood is, however, that she will be placed under formal investigation today – one step short of an actual charge – for “fraud” and “embezzlement of state funds”.

Mr Tapie was jailed in 1997 for offences including fixing matches for the football club he owned, Olympique Marseilles. He is a tycoon turned left-wing politician, who switched his allegiance to the centre-right candidate, Nicolas Sarkozy, in the 2007 presidential election.

In 1993, he began an interminable legal action against the French state, complaining that he had been defrauded by a state-owned bank, Crédit Lyonnais (now defunct) when it sold the sports company Adidas on his behalf .

Mr Tapie won a series of legal judgements but no agreement could be reached on compensation. In 2008, soon after she was appointed finance minister, Ms Lagarde appointed a four-man panel to short-circuit the legal arguments which proposed a €403m settlement.

Ms Lagarde says that the idea of an independent panel came not from her, but the bank’s state liquidator. In any case, she argues, it made sense to end an interminable wrangle which was also costing the state a great deal of money.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Building Manager / Head Porter

£25000 - £28000 per annum: Recruitment Genius: This award winning Property Man...

Recruitment Genius: Medical Copywriter / Account Manager

Negotiable: Recruitment Genius: This is an exciting opportunity to join an awa...

Recruitment Genius: Transport Clerk / Debriefer

£16000 - £20000 per annum: Recruitment Genius: This leading temperature contro...

Recruitment Genius: Digital Marketer

£18000 - £25000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific