May 20, 2011 / 5:30 PM / 8 years ago

Strauss-Kahn released on bail; IMF battle heats up

NEW YORK/WASHINGTON (Reuters) - Fallen IMF chief Dominique Strauss-Kahn left jail on bail on Friday and was expected to be whisked to a safe house off Wall Street where he will be held under round-the-clock armed guard.

Former IMF chief Dominique Strauss-Kahn (C) walks past a courtroom sketch artist for a recess during his bail hearing inside of the New York State Supreme Courthouse in New York May 19, 2011. REUTERS/Richard Drew/Pool

French Finance Minister Christine Lagarde led the race to succeed him in the top job in global finance.

But developing countries kept up pressure on Europe and the United States not to cut a backroom deal.

Strauss-Kahn, indicted for allegedly trying to rape a New York hotel maid last Saturday, left New York’s Rikers Island jail after a judge said his bail conditions had been met.

Photographers gathered outside an apartment building in New York’s financial district where he was expected to stay for a few days before finding a more permanent home in the city as legal proceedings play out.

A man held up a placard on which was scribbled - “D.S.K., Not In my Backyard,” referring to Strauss-Kahn’s initials.

The former French finance minister, who will subjected to electronic monitoring around the clock and must wear a tracking device on his ankle, was originally expected to be taken to an apartment on New York’s wealthy Upper East Side.

The plan was changed when news of the location leaked.

“The reason that we had to move is because members of the press attempted to invade his private residence,” defense lawyer William Taylor said.

Strauss-Kahn, 62, was once seen as a possible next president of France and he played a central role in tackling the global financial crisis of 2007-09. He denies the charges against him and has vowed to prove his innocence.

Lawyers representing him posted $1 million in bail and a $5 million insurance bond, as ordered by a judge on Thursday.

France’s Lagarde was in pole position to take over his job as many of Europe’s capitals rallied behind her.

She has been praised for her role in tackling the European debt crisis and her experience, with France this year chairing the Group of 20, in handing the often conflicting economic demands of advanced and developing economies.

The International Monetary Fund has always been run by a European since it was created at the end of World War Two.

The challenge for emerging economies to break Europe’s grip on the job got tougher when the most widely tipped potential candidate from among their ranks ruled himself out.

German Chancellor Angela Merkel all but endorsed Lagarde, telling a Berlin news conference saying she rated her highly.

Chairman of the U.S. law firm Baker & McKenzie in Chicago before she joined the French government in 2005, she is a fluent English speaker and has experience balancing the demands of rich and developing countries.

But diplomats said some European Union countries questioned whether Lagarde, who would be the first woman to head the IMF, could be anointed before a special court decides next month whether she should be investigated in a French legal case.

Since Strauss-Kahn quit on Wednesday, EU governments have rushed to fend off any challenge from emerging nations which have long wanted more say in how global finance is run.


Asian, Middle Eastern and African diplomats at the IMF headquarters in Washington said emerging nations were seeking a consensus candidate.

That task was made harder when former Turkish economy minister Kemal Dervis, seen as the front-runner among potential non-European contenders, ruled himself out.

The New York Times reported that Dervis had an affair with a subordinate when he was a senior World Bank executive. His office at the Brookings Institution in Washington said he would have no further statement.

With the euro zone debt crisis still far from under control, European and U.S. officials want to move quickly to replace Strauss-Kahn. But they also risk angering developing economies if they are seen to do a deal for Europe again.

Mexico sent a letter to the Group of 20 rich and emerging nations urging that the next IMF head be selected on merit, echoing calls from other emerging economies such as China whose clout in the world economy has grown in recent years.

Mexico is considering nominating its central bank chief Agustin Carstens, a former IMF official, for the managing director post, a source close to the government said.

“We are consulting broadly with the fund’s shareholders from emerging markets, as well as advanced economies,” said U.S. Treasury Secretary Timothy Geithner.

“We are prepared to support a candidate with the requisite, deep experience and leadership qualities, and who can command broad support among the fund’s membership.”

The United States and European nations hold more than half the IMF’s votes, enough power to decide who leads it.

The three biggest European powers — Germany, France and Britain — threw their weight behind her. Jean-Claude Juncker, who chairs euro zone finance ministers, and Italian Prime Minister Silvio Berlusconi also endorsed her on Thursday.

“It has to be a quick decision. It would be best to have consensus before going to the G8,” one diplomat said.


Leaders of the Group of Eight industrialized nations — the United States, Russia, Japan, Canada, Germany, France, Britain and Italy, plus the European Union — meet in the French seaside resort of Deauville on May 26-27.

Europeans argue it is essential to keep the job of head of the IMF because it is so immersed in helping euro zone states such as Greece, Ireland and Portugal with massive debts.

Some officials said the absence of Strauss-Kahn’s powers of persuasion contributed to disarray in Europe this week over whether Greece should restructure or “reprofile” its debt.

The Greek financial crisis deepened on Friday as ratings agency Fitch cut its rating on the country’s debt deeper into junk territory.

The IMF board on Friday approved its part of a 78 billion-euro bailout for Portugal.

Strauss-Kahn’s arraignment hearing is set for June 6, when he will formally answer the charges. A trial may be six months or more away. If convicted, he could face 25 years in prison.

Defense lawyer Benjamin Brafman has said the evidence “will not be consistent with a forcible encounter.”

Prosecutor John McConnell has said the maid, a 32-year-old from Guinea, told a “compelling and unwavering story.”

Under his IMF contract, Strauss-Kahn is entitled to a one-off payment of $250,000 with annual pension payments “far, far less than that amount,” the IMF said, dismissing media reports of a bigger package as “grossly over-estimated.”

Lagarde is also under some scrutiny.

A public prosecutor has recommended that she be investigated for allegedly abusing her authority to sidestep the justice system and push through a 285 million-euro ($403-million) arbitration settlement with businessman and ex-minister Bernard Tapie, overruling Finance Ministry experts at key stages. She denies wrongdoing and says she is victim of a smear campaign.

A special jurisdiction created to try ministers for offenses committed while in office will rule in mid-June whether she should face a full inquiry.

China and Japan called for a transparent, merit-based process. A European source said Beijing was privately supportive of Lagarde who now needed Latin American backing.

Additional reporting by Julien Toyer in Brussels, Daniel Flynn in Paris, Thorsten Severin in Berlin and Michelle Nichols in New York; Writing by William Schomberg; Editing by Christopher Wilson and Eric Walsh

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