IMF chief Lagarde named key witness in investigation of payoff to French business tycoon

PARIS - IMF chief Christine Lagarde says a Paris court has named her as a key witness in an investigation into a controversial payoff to an outspoken businessman arranged while she was France's finance minister.

The status of "assisting witness" means that Lagarde could later be charged in the case. The court assigned her the status Friday after two long days of questioning in the case.

The hearings centred on Lagarde's role in a 400 million euro ($520 million) pay-off to a controversial businessman when she was France's finance minister.

The payment was made to well-connected entrepreneur Bernard Tapie as part of a private arbitration process to settle a dispute with state-owned bank Credit Lyonnais over the botched sale of Adidas in the 1990s. It is seen by many in France as an example of the cozy relationship between big money and big power in France.

Friday's decision by the special court for government ministers prolongs the legal question-mark over Lagarde's head.

In a brief statement to reporters, she said the questioning had allowed her to "demonstrate that I have always acted in the best public interest and in accordance with the law ... Now, it's time for me to go back to work in Washington, and I will of course be briefing my board."

Investigators opened an inquiry in 2011 into possible charges of "complicity to embezzlement of public funds" and "complicity to forgery." The probe may not result in a trial. If it does, and if Lagarde were to be charged and then convicted, she could face up to 10 years in prison, according to prosecutors.

At the very least, the closed-door hearings have taken Lagarde away from her international duties. So far, the Washington-based IMF has stuck by her: She has earned praise for her negotiating skills as IMF managing director during Europe's debt crisis, and is seen as a trailblazer for women leaders.

The case could also tarnish France's image: Lagarde's compatriot, Dominique Strauss-Kahn, was the previous IMF chief. He resigned in 2011 after a New York hotel maid accused him of trying to rape her.