French police step up Lagarde probe

French investigators have stepped up a probe into allegations that Christine Lagarde, head of the International Monetary Fund, acted illegally when as French finance minister she instigated an arbitration process that awarded €400m to Bernard Tapie, the controversial businessman.

The Brigade Financière, which investigates white-collar crime, said its officers raided the homes on Thursday morning of Mr Tapie and Stéphane Richard, chief executive of France Telecom and Ms Lagarde’s chef de cabinet at the time of the award in 2008, in connection with the case.

Ms Lagarde, who denies any wrongdoing, has been under investigation since 2011 for her role in setting up an arbitration panel to settle a long-running dispute in which Mr Tapie claimed he was defrauded by Credit Lyonnais, a state-owned bank, over the sale of Adidas, the sportswear company he owned for a spell in the early 1990s.

The arbitration panel awarded him €285m plus interest, paid by taxpayers. The Court of Justice of the Republic, a special court which deals with cases of ministerial wrongdoing, ordered the investigation on suspicion that Ms Lagarde was guilty of abuse of power in imposing the arbitration process and that the government should have appealed the sum awarded.

At the time, the then Socialist opposition accused President Nicolas Sarkozy and his government of having rewarded Mr Tapie for his support in the 2007 presidential election. Before the arbitration panel was set up, the French state had strongly contested Mr Tapie’s litigation.

Mr Tapie is a colourful figure who served as a minister under François Mitterrand, the late former Socialist president. In 1997, he served six months in prison for match fixing involving his football team Olympic Marseille. He recently acquired a chain of local newspapers in the south of France.

In a statement, he confirmed the police raid on his home, saying it had lasted three hours but that no documents had been seized. He said he would make no further comment.

Mr Richard, who left the finance ministry to join France Telecom in 2009, also confirmed that his home had been raided in connection with the case, but made no further comment.

Ms Lagarde, who replaced Dominique Strauss-Kahn at the head of the IMF in 2011 when he resigned after a sex scandal, insists she acted within the law, arguing that it was legitimate to settle a case that had led to lengthy and costly litigation.

She has yet to be questioned in the case.