The International Monetary Fund managing director and former finance minister of France, Christine Lagarde is being grilled by French judges in a special court over her role in approving a €400 million ($520 million) to a colorful and highly controversial businessman when she was finance minister of the country.

christine lagarde

The questioning by court threatens to affect the reputation of France as well as Ms Lagarde. Entrepreneur Bernard Tapie had received that payment after a private arbitration process to resolve a dispute between him, Credit Lyonnais bank and the government related to the botched sale of adidas AG (ETR:ADS) (FRA:ADS). Mr Tapie had claimed that the credit Lyonnais defrauded him in the Adidas deal, a sports equipment maker he owned in the 1990’s.

Adidas Deal

Christine Lagarde is considered a trailblazer and her negotiation skills were highly admired through the Eurozone debt crisis. But her decision to take the Adidas dispute out of the courts to a private arbitration fueled speculations. The case going into a private arbitration was against the logic because it involved a state-owned bank.

Leading Socialist lawmakers, including the prime minister Jean-Marc Ayrault asked the court of justice of the republic (CJR) to investigate in 2011. Tapie was close to Lagarde’s previous boss Nicholas Sarkozy, and he had backed Sarkozy’s election campaign. So, the Socialists suspected that taking the arbitration out of courts was Sarkozy government’s trick to reward Mr. Tapie at the expense of public money. CJR deals specifically with ministerial issues.

Christine Lagarde Has The Backing of IMF

The questioning may last up to two days and Lagarde will be told after questioning if there is any formal investigation. If it results into a trial and if she is convicted, Lagarde may face up to 10 years in prison. The International Monetary Fund was aware of the probe when she replaced Dominique Strauss-Kahn as its managing director in 2011.

IMF said it is confident that Lagarde would be proven innocent. Christine Lagarde has already denied any wrongdoing.