PARIS — A French court on Thursday ordered an investigation into new IMF chief Christine Lagarde's role in a $400 million arbitration deal in favor of a controversial tycoon.
Investigators will open an inquiry this week into possible charges of "complicity to embezzlement of public funds" and "complicity to forgery," prosecutors said.
Lagarde was France's finance minister when magnate Bernard Tapie won a 2008 settlement with a French state-owned bank over the mishandled sale of sportswear maker Adidas in the 1990s. Critics viewed the settlement as an overly generous chunk of taxpayer money handed to a brash businessman.
The investigation comes as Lagarde is working to improve the reputation of the Washington-based International Monetary Fund after her predecessor, Dominique Strauss-Kahn, quit to face charges he tried to rape a New York hotel maid. He denies the charges.
The Lagarde investigation is likely to take months and may not result in a trial, but if it does, and if Lagarde should be convicted, she could face up to 10 years in prison. Lagarde can be questioned by prosecutors only if preliminary charges will eventually be filed against her.
The possibility of a French investigation dogged Lagarde even before she was appointed to head the IMF, and the institution's executive board reiterated its confidence in Lagarde Thursday.