* Ex-aide says Lagarde, then finance minister, knew case in detail
* Lagarde says she always acted in public interest
* Case revolves around big payout to businessman Tapie
PARIS, June 25 France Telecom's CEO said on Tuesday that IMF chief and former French finance minister Christine Lagarde was fully briefed before approving an arbitration process that saw businessman Bernard Tapie awarded a huge payout in 2008.
Investigators are trying to determine whether Tapie's political connections played a role in the government's decision to resort to arbitration to resolve the dispute. The process led to him receiving the equivalent of 403 million euros ($528 million) in damages and interest.
France Telecom CEO Stephane Richard, an aide to Lagarde when she was French finance minister, was placed under formal investigation this month over his role in the decision.
He said in a statement that Lagarde was aware of all the details in the dispute, suggesting she bore more responsibility for determining its outcome than magistrates have attributed to her.
Lagarde was questioned by magistrates in May but emerged with the status of "supervised witness", which is much less serious than being placed under investigation.
"Christine Lagarde... was totally up to date on the positions of various government services and fully aware when she gave written instructions to resort to arbitration," Richard said in a statement issued by his lawyer.
Richard is appealing the decision to place him under investigation, a step meaning that "serious or consistent evidence" point to probable implication in a crime.
Lagarde's lawyer in France was not immediately available to comment on Richard's remarks.
The case has now embroiled several members of former President Nicolas Sarkozy's cabinet, damaging his chances of making a political comeback for the 2017 election.
After lengthy questioning in May, Lagarde said she had always acted in the public interest as finance minister, offering no further details about her actions.
A legal source close to the case said suspicions over Richard's role would not necessarily influence inquiries targeting Lagarde, suggesting there was little immediate risk of her being called in for more questioning.
The arbitration was used to resolve a long-running dispute between Tapie and now-defunct bank Credit Lyonnais, which he said defrauded him by purchasing his interest in sports clothing company Adidas in 1993 for the equivalent of 315.5 million euros, only to sell it a year later for 701 million euros.
Investigators are trying to determine whether the close ties between Tapie and members of Sarkozy's inner circle influenced the government's 2007 decision to turn to a private arbitration tribunal to settle the matter. ($1 = 0.7637 euros) (Reporting by Chine Labbe; Writing by Nick Vinocur; Editing by Mark Trevelyan)