No Lagarde charges or probe

French magistrates on Friday chose not to place IMF boss Christine Lagarde under formal investigation after questioning the former finance minister for two full days.

Lagarde was named an "assisted witness" in a case investigating alleged government wrongdoing when settling a legal battle with controversial businessman Bernard Tapie in 2008. Tapie was a supporter of French President Nicolas Sarkozy in his 2007 election victory, and prosecutors at the special corruption-focused Court of Justice of the Republic (CJR) argue that he received preferential treatment as a result.

"My status as assisted witness is not a surprise," Lagarde told reporters in Paris. "I have always acted in the public interest and in accordance with the law."

The specialist French status of "assisted witness" is one rather large step from being "placed under investigation" as a potential defendant. Although an assisted witness can subsequently face charges if new details emerge incriminating them during the case, the immediate distinction is that assisted witnesses can bring a lawyer into court with them. Lagarde's lawyer told the AP news agency that he expected this status, because his client was too high-profile to be considered as a simple witness.

"My explanations answered questions raised about the decisions that I made at the time," the IMF's first woman leader said.

Settlement dispute

Lagarde in 2008 decided, going against some of her advisors, to ask a panel of judges to arbitrate in Tapie's case. They agreed on an out-of-court settlement that totaled 403 million euros ($522 million), once interest was added, in compensation to Tapie for the 1993 sale of sportswear brand Adidas. Tapie argued that the then state-owned Credit Lyonnais bank - that chose to buy the stock directly when Tapie asked them to sell for him - had consciously undervalued the brand, defrauding him in the process.

The settlement enabled Tapie - who was jailed in 1997 over match-fixing charges from his time as president of football club Olympique de Marseille - to get himself out from under the thumb of bankruptcy, settling his debts with enough still left over to begin again. He says that he would have won far more money in court, making a settlement sensible on all sides. But CJR prosecutors suspect that he would not have been able to bring the case before a judge owing to his monetary problems.

As a celebrity, former politician and one-time Socialist, Tapie's public endorsement of Sarkozy in the close 2007 election against Segolene Royal was a major boon for Sarkozy and Lagarde's conservative UMP party.

The ongoing probe at the CJR in Paris could take years, it's currently unclear whether anybody will face formal charges.

Lagarde said that, after her two days of testimony, it was time to return to work in Washington, adding: "I will of course be briefing my board."

The IMF has so far stood behind Lagarde, who took over from countryman Dominique Strauss-Kahn in mid-2011, after he resigned over allegations of sexual misconduct with a New York hotel maid.

"The Executive Board has been briefed on this matter several times and on each occasion expressed confidence in the Managing Director's ability to effectively carry out her duties," IMF spokesman Gerry Rice said.

msh/jm (AFP, AP, dpa, Reuters)