IMF's Lagarde guilty in French negligence trial

PARIS - French judges found IMF chief Christine Lagarde guilty of negligence on Monday for failing to challenge a state arbitration payout to a business tycoon in 2008 when she was French finance minister, but they did not punish her.

"The context of the global financial crisis in which Madame Lagarde found herself in should be taken into account," said Martine Ract Madoux, the main judge, in explaining the absence of any sentence.

She also cited Lagarde's good reputation and international standing as reasons why the court did not hand down a punishment in a case that could have carried a sentence of up to a year in prison.

In their ruling, the judges did not see negligence in Lagarde's decision to seek an out-of-court settlement with businessman Bernard Tapie, but they said her failure to contest the award to him of 400 million euros ($417 million) was negligent, and led to a misuse of public funds.

Lagarde's lawyer said immediately after the ruling that his team would look into appealing the decision.

The ruling risks triggering a new leadership crisis at the International Monetary Fund after Lagarde's predecessor Dominique Strauss Khan resigned in 2011 over a sex assault scandal.

The Washington-based institution's executive board was expected to meet shortly to consider the implications of the verdict, IMF spokesman Gerry Rice said.