IMF chief denies wrongdoing in French payout scandal

PARIS,

IMF chief Christine Lagarde Wednesday denied any wrongdoing as she was questioned for the third time by French prosecutors in a corruption case that has become a thorn in the side of one of the world's most powerful women.

Lagarde was grilled for more than 10 hours over her handling of a 400 million euro ($557 million) state payout to disgraced French tycoon Bernard Tapie in 2008 when she was finance minister.

Speaking afterwards Lagarde said the hearing had been "very respectful, very courteous".

"I have always acted in the interest of the country and in accordance to the law," she said.

Lagarde was questioned by prosecutors working for the Court of Justice of the Republic, a special court that probes cases of ministerial misconduct.

Tapie is suspected of receiving favourable treatment in return for supporting ex-president Nicolas Sarkozy in the 2007 election.

The payout was connected to a dispute between the businessman and partly state-owned bank Credit Lyonnais over his 1993 sale of sportswear group Adidas.

Tapie claimed Credit Lyonnais had defrauded him by intentionally undervaluing Adidas at the time of the sale and that the state, as the bank's principal shareholder, should compensate him.

Lagarde, who referred the dispute to a three-member arbitration panel that ruled in Tapie's favour, was questioned for two days in May last year about her role in the affair.

Prosecutors have suggested that Lagarde was partly responsible for "numerous anomalies and irregularities" that could lead to charges for complicity in fraud and misappropriation of public funds.

GENEROUS ARBITRATION

Lagarde on Wednesday faced her former chief of staff Stephane Richard, who is now head of telecoms giant Orange.

Richard is one of five people who have already been indicted in the case.

Wednesday's questioning revolved around a signature stamp used in a letter dated October 23, 2007 that investigators think is crucial in determining who took the decision on the controversial payout.

Lagarde says she was unaware of the contents of the letter and has told judges it was stamped with her signature in her absence.

In 2008 she told lawmakers that she had given instructions to back the decision on the payout and in that sense took responsibility for the contents.

But she later said that she did not "believe for a single moment that anybody had purposely orchestrated a generous arbitration."

Lagarde herself avoided being formally charged last year. If she had been charged, she would likely have had to quit as head of the International Monetary Fund.

Instead, she was placed under a special witness status that forces her to come back for questioning when asked by the court -- and leaves the door open for charges at a later date.

Richard was unrattled by the first encounter with Lagarde in court, a source close to him said.

"It's the first time after his indictment that Stephane Richard can make Christine Lagarde face all the contradictions," the source said.

Richard has consistently maintained that he was never in a position to take decisions by himself.

The IMF did not comment directly on the hearing but said its executive board "continues to express its confidence in the managing director's ability to effectively carry out her duties".