At the end of June 2011, just before Christine Lagarde was appointed by the International Monetary Fund as its Managing Director, I and my Mediapart colleague Laurent Mauduit sent The New York Times an opinion piece we had jointly written on why her candidature should be rejected.
On the recommendation of my colleague and friend Susan Chira, NYT foreign news editor, the editor of the paper's Opinions pages had agreed to consider it for publication. However, as events transpired we were caught by surprise by the rapidity of the decision to appoint Lagarde. The piece was never published.
On August 4th, France's Court of Justice of the Republic announced it was to investigate Lagarde for suspected 'aiding and abetting falsification' and 'misappropriation of public funds' in her handling of a huge compensation payout awarded to controversial French businessman Bernard Tapie while she was finance minister. In the light of that decision, and for the record, here is the full version of what Laurent Mauduit and I had to tell in that opinion piece in June:
Why Christine Lagarde should not become the next IMF managing director
More than a week ago, Christine Lagarde went to say goodbye to her staff at the French Ministry of Finance. As if her selection as the next IMF managing director was a ‘cause entendue', a done deal. That was before she completed a worldwide road show or met with the executive directors of the Fund who are now expected to rubberstamp a decision taken in capital cities. Typical French arrogance, one might think. We, as senior French independent journalists, wish to demonstrate why Miss Lagarde is professionally unqualified and morally unfit to take the helm at an institution expected to play such a key role at a critical juncture for the world economy.
If elected in the coming days, Christine Lagarde would become the fourth European politician in a row to run the IMF when none of her three predecessors completed his term, the last one, Dominique Strauss-Kahn, ending it in the spectacular fashion we all know about. So much for the commitment to the institution. And even though ‘DSK' himself, after being appointed in 2007, pledged to emerging countries he would be the last to claim the job by force of a feudalistic but unwritten rule excluding any ‘non-European' candidate.
A lawyer trained in labor-related issues, Miss Lagarde does not exhibit the academic or professional background required from a leader who will have to make tough calls on complex economic and financial policy decisions. As demonstrated by her opening statement to the executive board on June 23rd, her grasp of the various challenges the IMF is facing appears to be vague and superficial. The difference with the vision outlined by her only opponent, Banco de Mexico's governor Agustin Carstens, is striking. It would have been even clearer if some outstanding candidates were allowed or encouraged to run. Most didn't in part because Old Europe preempted the job allocation. Why bother to compete when the game appears to be fixed?
What about her experience as French finance minister for the past four years? Well, under Nicolas Sarkozy's ‘hyper-presidency' there is no such thing as a finance minister. All major (and a lot of minor) decisions on a vast range of issues, from financial regulation to tax reform and key appointments, are being prepared by a team of close advisers and ‘friends', inside or outside the Elysée Palace, and decided upon by the president. Besides, money is not run anymore from Paris but by the ECB in Frankfurt, and the budgetary policy is the reserve of another cabinet member.
Where Miss Lagarde should have been able to prove herself was the running of the eurozone since the gobal financial crisis has been pushing this unique experiment into rough and unchartered waters. Unfortunately, all she appears to be is a prominent member of a team who mismanaged the sovereign debt crisis In Greece and amongst other peripheral euroland members to a point where it is now endangering the global economic recovery and threatening a fragile financial stability. This a track record the IMF can do without.
In a fair and truly open competition, that would be enough to disqualify Christine Lagarde as the next managing director. But there is more, with potentially damaging implications for an institution reeling from the DSK debacle.
In her capacity as finance minister, she is the central figure in ‘Tapiegate', the most serious financial and political scandal to hit the four-year-old presidency of Nicolas Sarkozy. The case is regarded as so serious that the highest magistrate in France, head attorney at the Cour de Cassation (Court of Appeal), Jean-Louis Nadal, is asking the Cour de Justice de la République (CJR), a special court for judging cabinet members, to open an inquiry into a possible abuse of power by Miss Lagarde. The court is expected to announce a decision on July 8th. It means that barely selected, the IMF managing director would be called upon as a witness by the investigators and possibly indicted and facing a trial during the course of her mandate.
Over the past two years, Mediapart, an independent investigative online journal, has made public several confidential documents and reports related to the case, the ultimate being the daunting request addressed by Jean-Louis Nadal to the CJR. At stake are not only hundreds of millions of euros in taxpayers' money but the rule of law and the principles of transparency and accountability.
To cut a long story short, there is a ongoing litigation between on the one hand the former businessman turned politician, then convict and finally soap opera actor Bernard Tapie and the liquidators of his failed business empire, and on the other hand the structure of defeasance, the Consortium de réalisation (CDR) dealing with the legacy of Credit Lyonnais, a bankrupt state-owned bank. By 2006, the course of ordinary justice was clearly turning in favor of the CDR and the French taxpayers. But in 2007, Christine Lagarde, only just appointed Minister of Finance, endorsed the decision to hand out the case to private arbitration. The three arbitrators, one of them having had previous business relations with a lawyer working for Mr.Tapie, ruled in favor of the former businessman, handing taxpayers a bill of 403 millions euro (570 millions USD). Meanwhile, Miss Lagarde lied, although not under oath, when she assured members of the French National Assembly that the net financial gain to Mr. Tapie would never exceed 30 million euros.
It appears that private arbitration is illegal when public money is at stake. It has been revealed that Miss Lagarde ruled against an appeal when the decision turned so obviously detrimental to the interest of the state. It has even been discovered that the wording of the decision of the CDR board, taken at the request of the minister, was altered in favor of Bernard Tapie. The senior civil servant chairing the board meeting is now under investigation. Summing up his lengthy report listing numerous anomalies and questioning the decisions made by the finance minister, Jean-Louis Nadal concludes she acted "in contempt of the law".
If, as in other matters, Miss Lagarde implemented decisions made at a higher level, how can she provide the IMF with the independent leadership it deserves? And if those decisions were her own, how can her judgment and integrity not be called into question?
We believe the IMF deserves better. And we would like to respectfully remind the executive directors they are not merely ambassadors accountable to their national governments, according to the By Laws of the IMF. As any director in any institution, their loyalty should first go to the institution.
Laurent Mauduit, a former deputy news editor at French daily Le Monde, co-founded Mediapart in 2008. Philippe Riès, a journalist with 36 years' professional experience, is a former chief economics editor at French news agency Agence France-Presse who joined Mediapart at its creation.