IMF chief Christine Lagarde escapes formal investigation

French magistrates decided on Friday not to place IMF chief Christine Lagarde under formal investigation over her role in a 285-million-euro ($368.5 million) arbitration payment made to a supporter of former president Nicolas Sarkozy. Lagarde instead was given the status of a "supervised witness" after two full days of questioning on her 2008 decision as Sarkozy's finance minister to use arbitration to settle a legal battle between the state and businessman Bernard Tapie. The decision removes a headache for Lagarde, the only French national heading a major international institution today, and for the International Monetary Fund (IMF), for which a formal investigation of her would have been highly embarrassing. Emerging from a Paris court late on Friday evening, a composed-looking Lagarde read from a statement asserting that she had not acted against the public interest. "My explanations answered questions raised about the decisions that I had made at the time," she told reporters. "My status as a supervised witness is not a surprise for me because I always acted in the interest of the state and according to the law."

She added: "Now, it's time for me to go back to work in Washington, and I will of course be briefing my board."

The status of supervised witness means that in any future hearings, Lagarde would answer questions as a witness accompanied by a lawyer.

It is much less serious than being placed under formal investigation, which would have indicated "serious or consistent evidence" pointing to her probable implication in a crime.

The IMF reaffirmed its confidence in Lagarde, who took over the helm after her predecessor, Frenchman Dominique Strauss-Kahn, quit in mid-2011 over a sex assault scandal.

"The Executive Board has been briefed on this matter several times and on each occasion expressed confidence in the Managing Director's ability to effectively carry out her duties," spokesman Gerry Rice said in Washington.