IMF Dropped Internal Probe of Strauss-Kahn After Woman Wouldn’t Cooperate

An internal investigation by the International Monetary Fund into allegations that Dominique Strauss-Kahn, then its managing director, abused his position of power failed because the alleged victim refused to cooperate.

Piroska Nagy, an IMF economist who had a brief romantic relationship with Strauss-Kahn in January 2008 didn’t participate in the bank’s internal probe in the summer of 2008, she said in a letter three years ago. She wrote to Robert Smith, the outside lawyer who was brought in to investigate Strauss- Kahn’s behavior after the internal probe stalled. She cooperated in Smith’s investigation.

“Because I did not fully trust the internal processes at the fund, I declined to cooperate with the fund’s initial investigation,” Nagy wrote on Oct. 20, 2008, just days before Smith concluded his investigation.

The IMF referred questions about the internal probe to Smith, the Morgan Lewis & Bockius LLP attorney who led the investigation. Smith declined to comment. Nagy, who joined the European Bank for Reconstruction and Development in mid-2008, didn’t reply to an e-mail message seeking comment.

Nagy’s letter, which didn’t become public until after Smith’s investigation cleared Strauss-Kahn of charges of sexual harassment, favoritism and abuse of office, has generated renewed interest in it following the IMF chief’s arrest last week on charges of the attempted rape and sexual assault of a maid at a Manhattan hotel.

Strauss-Kahn, who has denied the charges against him, resigned from the IMF May 18. He was granted bail on May 19 and was released from jail in New York yesterday.

Damned Either Way

“I believe that Mr. Strauss-Kahn abused his position in the manner in which he got to me,” Ms. Nagy wrote in the letter, which was obtained by Bloomberg News. “I provided you the details of how he summoned me on several occasions and came to make inappropriate suggestions to. . .I did not know how to handle this; as I told you I felt that I was ‘damned if I did and damned if I didn’t.’”

Nagy praised her former boss as a “brilliant leader with a vision for addressing the ongoing global financial crisis. He is also an aggressive if charming man. . .But I fear that he is a man with a problem that may make him ill-equipped to lead an institution where women work under his command.”

Smith’s investigation, which unearthed a chain of e-mail and text messages between Nagy and Strauss-Kahn, concluded that the relationship was “consensual.”

Nagy wrote her letter, she said, because the existence of the investigation had been leaked to two newspapers, and the publication of her involvement with Strauss-Kahn had resulted in “public humiliation” for her and her husband.

To contact the reporter on this story: Greg Farrell in New York at gregfarrell@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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