PARIS — French police searched the Paris apartment of International Monetary Fund chief Christine Lagarde on Wednesday as part of an investigation into the awarding of financial compensation to a supporter of former French President Nicolas Sarkozy.
Lagarde, who served as France’s finance minister during Sarkozy’s presidency before taking her current post, has been the subject of a preliminary police investigation for alleged “complicity of the embezzlement of public funds” since 2011.
The scandal broke shortly before she was named managing director of the IMF, replacing her compatriot Dominique Strauss-Kahn after he was arrested in New York over the alleged assault of a hotel maid. Charges in that case were later dropped.
The Lagarde investigation centers on a $400-million settlement awarded to controversial French business tycoon and former football club owner Bernard Tapie in 2008. The payment was compensation following a 20-year legal battle with a bank owned in part by the government over the sale of sportswear brand Adidas, of which Tapie was the main shareholder.
While serving as finance minister in the center-right government led by Sarkozy, Lagarde referred the long-running dispute between Tapie and the bank Credit Lyonnais to a private arbitration service. Critics have said Lagarde abused her authority and should never have brought in private arbitrators because public money was involved.
The search of Lagarde's apartment came just hours after a government minister in Socialist President Francois Hollande's administration resigned in a separate case involving allegations of tax evasion. Jerome Cahuzac, the budget minister in charge of clamping down on fiscal fraud, was accused of hiding money in a secret Swiss bank account.
Both Lagarde and Cahuzac have strongly denied the allegations against them. Lagarde, who approved the Tapie damages, said at the time it was the “best solution."
Lagarde's lawyer Yves Repiquet told reporters Wednesday that the search of her property “will serve to establish the truth and contribute to the exoneration of my client of any criminal wrongdoing.”
Tapie, who was convicted of match fixing while he was head of the French football club Olympique de Marseille and imprisoned in 1997 for six months, had lost his case in France's highest law court but was planning to appeal when Lagarde stepped in to resolve the case.
Lagarde may be forced to stand down from her IMF post if investigators decide there is enough evidence to open a full inquiry.