PARIS IMF chief Christine Lagarde will be questioned by a French magistrate on Thursday over her role in a 285-million-euro ($366 million) arbitration payment made to a supporter of former president Nicolas Sarkozy.
Lagarde risks being placed under formal investigation at the hearing for her 2007 decision as Sarkozy's finance minister to use arbitration to settle a long-running court battle between the state and high-profile businessman Bernard Tapie.
Under French law, that step would mean there exists "serious or consistent evidence" pointing to probable implication of a suspect in a crime. It is one step closer to trial but a number of such investigations have been dropped without any trial.
Such a move could prove uncomfortable for the International Monetary Fund, whose former head, Frenchman Dominique Strauss-Kahn, quit in 2011 over a sex assault scandal, and for a woman who has been voted the most influential in France by Slate magazine.
Lagarde is not accused of financially profiting herself from the 2007 payout and has denied doing anything wrong by opting for an arbitration process that enriched Tapie.
However a court specializing in cases involving ministers is targeting her for complicity in the misuse of funds because she overruled advisers to seek the settlement.
"The (IMF's) board is comfortable that she did not profit from this herself. For now it is not a concern," a source close to the board said, adding that it could reconsider that position if judicial procedures took Lagarde away from her duties.
FORMAL INVESTIGATION THREAT
Lagarde, herself a former lawyer and based in Washington since taking the IMF helm, said last month she was perfectly happy to go to Paris to answer questions about the Tapie affair. Her lawyer has played down the hearing as routine.
The hearing, the first time Lagarde has been questioned over the affair, starts on Thursday and will likely run into Friday.
A judge will either place Lagarde under formal investigation or give her the status of "supervised witness", which means she will have to answer questions as a witness accompanied by a lawyer.
The case goes back to 1993 when Tapie, a colorful and often controversial character in the French business and sports world, sued the state for compensation after selling his stake in sports company Adidas to then state-owned bank Credit Lyonnais.
Tapie, a one-time Socialist minister who later became a supporter of the conservative Sarkozy, said the bank had defrauded him after it later resold his stake for a much higher sum. Credit Lyonnais, now part of Credit Agricole, has denied any wrongdoing.
The long-lingering case, which saw Lagarde's Paris apartment searched in March, has stayed largely under the international media's radar screen as the former finance minister won plaudits for her role in Europe's response to the 2009 credit crisis and in putting together the 2010 Greek bailout.
A former synchronized swimmer who shuns coffee and alcohol, her arrival at the IMF helped the institution turn the page on the Strauss-Kahn affair as he fought sex assault charges that were later dropped.
A ranking put together this week by Slate Magazine in France and online dating firm AdopteUnMec (Adopt-a-Guy) rated Lagarde France's most influential woman in a list of 100. ($1 = 0.7778 euros)
(Additional reporting by Lesley Wroughton in Washington; Writing by Leigh Thomas; Editing by Catherine Bremer, Mark John, Alison Williams)