French judges on Monday found International Monetary Fund (IMF) chief Christine Lagarde guilty of negligence over a massive payout to a tycoon in 2008 when she was a finance minister.
Despite being found to be at fault, the judges did not sentence her to prison or impose any fine.
Lagarde was found guilty for her decision to let a dispute, over business tycoon Bernard Tapie’s sale of the Adidas sports brand to Credit Lyonnis bank, be resolved by a private arbitration panel rather than the usual courts.
The court said she failed to challenge a 400 million euro state arbitration payout to Tapie. It is alleged that Lagarde's payout was a reward for Tapie backing Sarkozy's election campaign.
Martine Ract Madoux, the main judge, in explaining the absence of any sentence cited “the context of the global financial crisis,” 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 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.
The ruling risks triggering a new leadership crisis at the IMF after Lagarde's predecessor Dominique Strauss Khan resigned in 2011 over a sex assault scandal.
Lagarde to continue as IMF chief
The IMF said on Monday it retains "full confidence" in Lagarde's ability to continue to lead the organisation, despite her conviction.
"In this context, the Executive Board reaffirms its full confidence in the managing director's ability to continue to effectively carry out her duties," the IMF board said in a statement.
The Executive Board looks forward to continuing to work with the managing director to address the difficult challenges facing the global economy.