A FRENCH court has ordered an investigation into new IMF chief Christine Lagarde's role in a €285 million (£247m) arbitration deal in favour of a controversial tycoon.
Investigators will open an inquiry next week into possible charges of "complicity to embezzlement of public funds" and "complicity to forgery," prosecutors said.
Ms Lagarde was France's finance minister when magnate Bernard Tapie won a 2008 settle
ment with state-owned bank Credit Lyonnais over the mishandled sale of sportswear maker Adidas in the 1990s. Critics said the settlement was overly generous. Mr Tapie is close to president Nicolas Sarkozy.
The investigation comes as Ms Lagarde is working to improve the reputation of the International Monetary Fund after predecessor Dominique Strauss-Kahn quit to face charges he tried to rape a New York hotel maid. He denies the charges.
A commission at France's Court of Justice of the Republicdecided an investigation should be launched into Ms Lagarde's role in the arbitration deal.
The probe is likely to take months and may not result in a trial - but if it does, and if Ms Lagarde should be convicted, she could face up to ten years in prison.
Her lawyer, Yves Repiquet, said his client welcomed the probe. He said: "We'll get to the bottom of things. There will no longer be the least doubt."