World - IMF chief under scanner

Vaiju Naravane


Paris: International Monetary Fund (IMF) Managing Director Dominique Straus-Kahn (59) is under investigation for nepotism and possible abuse of power, the organisation confirmed, after the Wall Street Journal revealed details of the case on Saturday.

Mr. Strauss-Kahn, who had an extramarital relationship with senior IMF economist Piroska Nagy of Hungary, is accused of having helped her get a generous severance package on her departure from the IMF. Mr. Strauss-Kahn denied any wrongdoing and said he is cooperating with the inquiry.

These developments closely echo the scandal a year ago that forced the departure of the World Bank’s former President, Paul Wolfowitz, after it was proved he was instrumental in giving a generous severance package to a former lover at the bank.

The IMF said it had set up an independent inquiry into the matter. Morgan, Lewis and Bockius — the law firm hired for the purpose — would come up with its findings within a month. The IMF, often referred to as the “bank of last resort,” has been called in several times in the past to bail out failed states.

This embarrassing development comes at a delicate time, when the world is plunged into the worst financial crisis since the Great Depression.

Mr. Strauss-Kahn, a respected economist who was a successful France’s Finance Minister, was named to the IMF’s top position in September 2007 with a mandate to overhaul and reform the institution. What has caused embarrassment and damage to Mr. Strauss-Kahn is that his extramarital affair was brought to the IMF’s notice by Ms. Nagy’s husband, who discovered an exchange of intimate e-mails between the two. Mr. Strauss-Kahn reportedly met Ms. Nagy in December 2007, soon after his appointment.

The two became intimate in January 2008. She resigned in August 2008 when the IMF in a Reduction in Force exercise offered golden handshakes to employees agreeing to leave.

The inquiry was ordered by Shakur Shalan, who represents Egypt and other Arab nations on the IMF Board, after “having heard of certain allegations last summer.

Mr. Strauss-Kahn described the affair as “an incident in my private life in January 2008” and said he is “cooperating and will continue to cooperate” with the inquiry. If the charges are proved, he could find his political hopes in France devastated.

For, while the French are indulgent towards politicians who have love affairs, they are less tolerant of financial wrongdoing and abuse of power.