Famed for her glamorous style and easy charm, at home on a chat show as she is in the boardroom, Christine Lagarde was welcomed as the new boss of the International Monetary Fund (IMF) in 2011 by those that were sick of stuffy economists with – allegedly – wandering hands.
In reality, anyone that replaced the scandal-hit Dominique Strauss-Kahn was going to be seen as a breath of fresh air and by comparison as squeaky clean as is possible. However, despite her credentials, Lagarde’s tenure as IMF chief has seen a number of scandals that has led to some questioning whether she is as saintly as many had previously assumed.
Born into a family of Parisian academics, Lagarde’s early life was spent in Le Havre, before she gained a scholarship in 1973 to the Holton-Arms School in the US. It was there that she gained her first experience of the political world that she would have to manoeuvre later on in life, as she spent time as an intern for US Senator William Cohen. Upon graduating from the Paris West University Nanterre La Defense with a Master’s in English and law, she would go on to return to the US at Chicago law firm Baker & Mackenzie.
Part of her responsibility at the firm was to handle antitrust and labour disputes, and such was her success that she was made partner and head of its European division six years after joining. By 1999 she was appointed the firms first ever woman chairman.
France’s first lady of finance
In 2005 she entered into politics as France’s Trade Minister under the then President Jacques Chirac, where she focused her attention on pushing the country’s products into new markets. She would remain in government after the 2007 election of right-wing President Nicholas Sarkozy, briefly serving as Minister for Agriculture before being appointed France’s first ever-female Finance Minister.
Lagarde’s tenure as IMF chief has seen a number of scandals that has led to some questioning whether she is as saintly as many had previously assumed
Her four years in charge were deemed hugely successful by some, as she boosted the country’s export levels to their highest level, leading to her being voted Europe’s best finance minister in 2009 by the FT. Frequently touring television studios and global summits, lecturing the banking industry on how they had got things so wrong, Lagarde was seen as one of the few finance ministers to come through the financial crisis with their reputations intact.
However, her time in charge was not without incident. In 2010, she sent a list of nearly 2,000 Greek customers that had undeclared accounts at the Swiss branch of HSBC to Greek authorities. It was intended to help Greece’s government to crack down on tax evasion from some of its wealthier citizens, but fell into the hands of journalist Kostas Vaxevanis two years later, who would then publish the list as no action had been taken against those on it.
He was then arrested for breaching privacy laws, although later acquitted. While it has not been suggested that Lagarde was at fault in the scandal, it seems somewhat inappropriate for the Finance Minister of France to be meddling in the affairs of Greek citizens with bank accounts in Switzerland.
The position of Managing Director of the IMF is the pinnacle of global economics, carrying great sway and huge prestige. The role is supposed to be one that unites the financial leaders of the world, guiding economies that are struggling and advising on future policy. Typically a European has held the position, whereas the chief of the World Bank has been from the US. However, BRIC nations have petitioned for a more representative choice of leader, something that was promptly ignored on the appointment of Lagarde.
When the Strauss-Kahn scandal erupted in 2011, Lagarde was quick to announce her candidacy as his replacement. A popular candidate, she received the support of many governments from across the world, including those from the US, UK, India, China and Germany. However, some were concerned about her being yet another candidate from France – five of the 11 previous IMF chiefs have been French, serving for 27 years out of the last 34. In particular, representatives of emerging economies in Asia and Latin America felt that it was perhaps time for someone from outside of Europe to get the job.
Even so, Lagarde’s high profile and seeming popularity proved too persuasive. At the end of June, a month after announcing her candidacy, she was voted in as the new managing director of the IMF, beginning what will be an initial five-year term. Despite the disgruntled reaction from many outside of Europe, the decision was met with warmth from other leading financial policymakers. Timothy Geithner, the former US Secretary of the Treasury, for example, described Lagarde in glowing terms. “Her lightning-quick wit, genuine warmth and ability to bridge divides while remaining fiercely loyal to French interests have been a source of admiration.”
However, despite the enthusiasm with which her appointment was greeted, Lagarde’s tenure has not been plain sailing. Scandals dating back to her time as French Finance Minister were revealed that put her previous dealings under the spotlight and led to suspicions that she had done political favours for a particularly dubious character.
Very dubious friends
Bernard Tapie is a high profile French businessman that has been in the pubic eye for all the wrong reasons for over two decades. Accused of match fixing during his time as owner of French football giant Olympique de Marseille in 1993, Tapie was subsequently sent to prison for corruption and intimidating witnesses. His sentence resulted in him spending six months behind bars.
However, despite his brushes with the law in the 1990s, Tapie didn’t stop courting controversy, which ultimately led to Lagarde’s troubles. Even though he had previously served as a minister in a socialist government, Tapie heavily backed Sarkozy’s right-wing Union for a Popular Movement (UMP) party at the 2007 election.
The news raised many eyebrows, with people speculating why some who had been so ideologically to the left of the political spectrum would choose to support such a pro-business candidate. It turned out that Tapie’s real motive had been solving a number of tax issues he was facing, which Sarkozy – and importantly Lagarde – had allegedly offered to resolve upon their election.
Tapie was involved in a long-running financial dispute with French bank Credit Lyonnais over the sale of sports manufacturer Adidas in 1993. He argued that he had been defrauded by the bank, who had gone behind his back to sell the firm, having agreed a separately high price with eventual buyer Robert Louis Dreyfuss. In 2007, Lagarde stepped in, ordering that the case be assigned to a special arbitration panel, which would later rule in Tapie’s favour, netting him €403m in damages.
The controversy over Lagarde’s role has dogged her ever since. It was seen as an inappropriate interference by the then Finance Minister on behalf of a man that had recently helped put her party in power. Just a few months after being appointed IMF chief, she was placed under investigation by a French court over the affair, with claims that she had abused her position of power as Finance Minister to help secure a huge state settlement for Tapie, who was a friend of President Sarkozy.
In May 2013, prosecutors at the Court of Justice of the Republic grilled Lagarde for two days over the scandal. Two days later, police raided her house, as they sought to find incriminating evidence, however she was then dubbed by the court an “assisted witness”, meaning that she was not under any investigation. Despite this, rumours continue to swirl about her involvement, with her former aide and current France Telecom CEO Stephane Richard saying she was fully aware of the situation when approving the arbitration that favoured Tapie.
In another twist towards the end of March, Lagarde was summoned by French prosecutors to give further evidence over the case, alongside Richard. She has still maintained her status as an ‘assisted witness’, meaning she isn’t suspected of any wrongdoing. However, the fact that Richard is under formal caution and that the case has not been settled means the controversy around her will rumble on longer.
Do as I say, not as I do
Another unfortunate event was to hit Lagarde in 2012, significantly damaging her credibility. Having lectured wealthy businessmen over avoiding paying their taxes, as well as governments for not doing enough to capture them, Lagarde was revealed to be somewhat of a hypocrite.
In an interview with The Guardian newspaper that year, Lagarde said that Greek citizens – at the time under serious pressure brought on by the eurozone crisis – should not expect any sympathy for the difficulties they were facing, that it was payback time, and there were people facing greater difficulties in the world. “I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens.”
She added, “As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.” She went onto say that she saw little difference between Greeks avoiding paying taxes and those facing cuts in public services, and they should collectively “help themselves” by paying their taxes.
However, it was quickly revealed that while she was happy to tell others they should be expected to pay their way, she was herself enjoying a tax-free existence. Her almost $500,000 a year salary at the IMF is exempt from taxes as she is an official at an international institution. It is a startling piece of hypocrisy, especially as she is paid more than even President Barack Obama, and he pays taxes on his salary. While she is not alone in enjoying these benefits – World Bank and UN employees also enjoy them – it is pretty rich of her to be lecturing others on paying their taxes when she herself doesn’t.
While it is almost impossible to find a leading political or business figure that doesn’t have unfortunate episodes in the past, Lagarde seems to have escaped the sort of scrutiny that many of her predecessors have faced. Perhaps it is because of her easy charm and charisma – as well as shocking nature of her predecessors’ downfall – that has allowed Lagarde to continue in her role relatively unscathed by these scandals. However, anyone that is putting themselves forward as the head of the world’s most respected financial authority should expect far greater scrutiny than she has seen.
