IMF Chief Lagarde’s Home Searched by French Police

French police searched the Paris home of International Monetary Fund Managing Director Christine Lagarde as part of an inquiry into an arbitration that awarded $500 million to a supporter of former President Nicolas Sarkozy.

The Cour de Justice de la Republique, which investigates ministers’ actions in office, is looking into whether Lagarde, a onetime finance minister under Sarkozy, erred in agreeing to an arbitration to end a dispute involving business tycoon Bernard Tapie. The raid, which took place yesterday, was confirmed by the Paris prosecutor’s office and Lagarde’s lawyer.

Lagarde “considers that this will enable to establish the truth and will ultimately lead to the termination of all investigations,” Yves Repiquet, her lawyer, said in a statement.

Tapie, who has also dabbled in politics and acting, in 2008 won a 385 million euro ($498 million) arbitration award to settle a dispute over his company’s sale of German sportswear brand Adidas AG. He contended that Credit Lyonnais mishandled the 1993 sale and pursued a claim against the formerly state-owned bank’s liquidator.

Tapie, a minister for less than a year under former Socialist President Francois Mitterrand in the 1990s, endorsed Sarkozy’s successful presidential effort in 2007 and failed re-election bid in 2012.

Creditors’ Claims

The arbitration court awarded Tapie 45 million euros in damages on top of 240 million euros for his creditors and about 100 million euros in interest. Lagarde refused to appeal the decision, saying “a very large majority” of the money would return to the state through the creditors’ claims.

The court opened its investigation into whether there was “complicity in forgery” or “complicity in misuse of public funds” in the case in 2011, soon after Lagarde became IMF head.

“It would not be appropriate to comment on a case that has been and is currently before the French judiciary,” Gerry Rice, a spokesman for the Washington-based IMF, said in a statement. “Prior to its selection of the managing director, however, the IMF’s executive board discussed this issue and expressed its confidence that Madame Lagarde would be able to effectively carry out her duties.”

Lagarde returned to Washington yesterday from a trip to North Africa and Europe, where she attended discussions with finance ministers to bail out Cyprus.

On March 19, she endorsed a rescue deal for Cyprus outlined by euro-area finance chiefs, to which the IMF may also contribute. She said Cyprus will need to shrink its banking sector as part of any rescue package.

Earlier Raids

The search wasn’t the first as part of the investigation. Police raided the home and office of Claude Gueant, Sarkozy’s former staff chief, France Info radio reported last month. Also searched were the homes of Tapie, France Telecom SA Chief Executive Officer Stephane Richard, Lagarde’s staff chief when she was finance minister, and those of the arbitration panel judges as well as Tapie’s lawyer’s office.

When Lagarde took over the IMF, the institution was reeling from the arrest of former chief Dominique Strauss-Kahn on charges including attempted rape of a hotel maid in New York. The charges were later dropped and he settled the maid’s lawsuit last year.

The longest-serving finance minister of France since the 1970s, Lagarde has stood by her decision in the Tapie case, saying in an interview broadcast by France 2 television on Jan. 25 that “it was the best solution at the time and I think it was the right choice.”

Before it's here, it's on the Bloomberg Terminal.