News

May 23, 2011

STRAUSS-KHAN’S SEX SCANDAL : French Finance Minister, Christine Lagarde, favoured for IMF top job

LAGOS – Indications emerged yesterday that French Finance Minister, Christine Lagarde, may get the plump job of Managing Director of International Monetary Fund, IMF,  following the exit of the former Managing Director Dominique Strauss-Khan. If she sails through she will be the first female Managing Director of the 60-year-old Fund.

The race for the job had shown that Europe and the emerging economies were ready to fight it out with Britain, initially saying it will support a non-European for the job. But emerging economies are divided and have not been able to give their support to one candidate.  Traditionally, while the President of the World Bank is appointed from United States, Europe is the natural choice for the position of IMF Managing Director.

Lagarde’s baggage
However, Christine Lagarde is yet to be nominated by France and nomination begins today, May 23, and will close on June 10. Lagarde’s chances of securing the top IMF role may hinge on how she resolved a two-decade-old dispute involving a supporter of President Nicolas Sarkozy. France’s Court de Justice de la Republique, which oversees ministers’ actions in office, has until June 10 to decide whether to investigate if Lagarde abused her powers in agreeing in 2007 to send the case to arbitration.

It resulted in a 385 million-euro ($550 million) award to Bernard Tapie, a former Socialist minister who endorsed Sarkozy’s presidential effort. Lagarde has rejected accusations of her decision to take the matter to arbitration and not appeal the award was a reward for Tapie’s support of Sarkozy.

As at yesterday, high profile voices and international political heavyweights have given their support to Largard. The United Kingdom said it will back Christine Lagarde to become the next MD. The Chancellor of the Exchequer, George Osborne, who is a member of the Board of Governors of IMF announced Britain’s support for adding to the cascade of European endorsements for her.

Osborne praised Lagarde for her leadership skills during France’s presidency of the Group of 20 and for her “strong” advocacy of countries taking steps to reduce budget deficits. Last week, Osborne had left open the possibility that Britain might endorse a non-European to head the fund.

Christine Lagarde

He said: “On the basis of merit, I believe Christine is the outstanding candidate for IMF, and that’s why Britain will back her.  I personally think it would be a very good thing to see the first female Managing Director of IMF in its 60-year history.”

Lagarde has emerged as the leading contender to replace Dominique Strauss-Kahn at IMF as developing nations have failed to unite behind one candidate. Strauss-Kahn, who’s also French, resigned on May 19, four days after his arrest in New York on sexual-assault charges.

German Chancellor Angela Merkel has described Lagarde as an “excellent and experienced person” and that consensus was emerging in Europe for her to get the IMF job, Deutsche Presse-Agentur said. Austria may support Lagarde, Finance Minister Maria Fekter also said yesterday, according to Agence France-Presse.

Osborne’s backing reduces the prospect that former Prime Minister Gordon Brown will get the position. The Financial Times reported last week that Brown, who served as chancellor for 10 years, had told friends he had international backing for his candidacy. Osborne said in an interview last week that Brown hadn’t asked the British government to support him. This month, Prime Minister David Cameron said Brown might not be the “most appropriate” candidate because the job needs someone who “understands the danger of excessive debt.”

The IMF Executive Board has initiated a selection process for the next Managing Director. The Dean of the Executive Board of IMF, Mr. Shakour Shaalan, said weekend: “I am very pleased to announce that the Fund’s Executive Board has adopted a procedure that allows the selection of the next Managing Director to take place in an open, merit-based, and transparent manner. There was broad support in the Executive Board for this procedure.”

Criteria for IMF top job
The Executive Board, he said, approved the decision on the selection of the next MD in the following manner; that:

*The successful candidate for the position of MD will have a distinguished record in economic policy-making
at senior levels.

*He or she will have an outstanding professional background, will have demonstrated the managerial and
diplomatic skills needed to lead a global institution, and will be a national of any of the Fund’s members.

*As chief of the Fund’s staff and as Chairman of the Executive Board, (s)he will be capable of providing
strategic vision for the work of a high quality, diverse, and dedicated staff; and will be firmly committed
to advancing the goals of the Fund by building consensus on key policy and institutional issues, including
through close collaboration with the Executive Board, under whose direction (s)he will fulfill his or her
responsibilities.

*(S)he will have a proven understanding of the Fund and the policy challenges facing the Fund’s diverse
global membership.

*(S)he will have a firm commitment to, and an appreciation of, multilateral cooperation and will have a
demonstrated capacity to be objective and impartial.

*(S)he will also be an effective communicator.

* An individual may be nominated for the position of Managing Director by a Fund Governor or an Executive
Director during a nomination period which shall commence on May 23, and will close on June 10. All nominations shall be communicated to the Fund’s Secretary, who shall obtain confirmation from each nominee of his or her willingness to be considered as a candidate. The Fund’s Secretary shall hold the names of the nominees in confidence until the end of the nomination period.

* At the end of the nomination period, the Secretary shall disclose to the Executive Board the names of those nominees who have confirmed their desire to be candidates. If the number of candidates exceeds three, the Executive Board will keep the names of these nominees in confidence until it has drawn up a shortlist of three candidates, taking into account the above candidate profile without geographical preferences.

*The shortlisting process will be implemented through indications of which candidates receive the most support among directors, taking into account the Fund’s weighted voting system, with the objective of completing the shortlisting process within seven days following the disclosure to the Board of the candidates. Although the Executive Board may adopt a shortlist by a majority of the votes cast, the objective of the Executive Board is to adopt a shortlist by consensus. The shortlist shall be published by the Fund.
*The Executive Board will meet with the shortlisted candidates (or all of the candidates if there were fewer than four) in Washington, D.C. Thereafter, the Executive Board will meet to discuss the strengths of the candidates and make a selection. Although the Executive Board may select a Managing Director by a majority of the votes cast, the objective of the Executive Board is to select the Managing Director by consensus with the objective of completing the selection process by June 30, 2011.

But an internal investigation by the International Monetary Fund into allegations that Dominique Strauss-Kahn, then its managing director, abused his position of power failed because the alleged victim refused to cooperate. Piroska Nagy, an IMF economist who had a brief romantic relationship with Strauss-Kahn in January 2008 didn’t participate in the bank’s internal probe in the summer of 2008, she said in a letter three years ago. She wrote to Robert Smith, the outside lawyer who was brought in to investigate Strauss-Kahn’s behaviour after the internal probe stalled. She cooperated in Smith’s investigation.

“Because I did not fully trust the internal processes at the fund, I declined to cooperate with the fund’s initial investigation,” Nagy wrote on October 20, 2008, just days before Smith concluded his investigation.

The IMF referred questions about the internal probe to Smith, the Morgan Lewis & Bockius LLP attorney who led the investigation. Smith declined to comment. Nagy, joined the European Bank for Reconstruction and Development in mid-2008.

Nagy’s letter, which didn’t become public until after Smith’s investigation cleared Strauss-Kahn of charges of sexual harassment, favouritism and abuse of office, has generated renewed interest in it following the IMF chief’s arrest last week on charges of the attempted rape and sexual assault of a maid at a Manhattan hotel. Strauss-Kahn, who has denied the charges against him, resigned from the IMF May 18. He was granted bail on May 19 and was released from jail in New York Friday.

“I believe that Mr. Strauss-Kahn abused his position in the manner in which he got to me,” Ms. Nagy wrote in the letter. “I provided you the details of how he summoned me on several occasions and came to make inappropriate suggestions to me. I did not know how to handle this; as I told you I felt that I was ‘damned if I did and damned if I didn’t.’”

Nagy praised her former boss as a “brilliant leader with a vision for addressing the ongoing global financial crisis. He is also an aggressive if charming man. But I fear that he is a man with a problem that may make him ill-equipped to lead an institution where women work under his command.”Smith’s investigation, which unearthed a chain of e-mail and text messages between Nagy and Strauss-Kahn, concluded that the relationship was “consensual.”