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IMF investigates Strauss-Kahn over sex affair

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Latest update : 2008-10-20

The International Monetary Fund is investigating its chief, Dominique Strauss-Kahn, for the alleged abuse of his position in connection with a relationship with a subordinate.

The International Monetary Fund said on Saturday it was investigating whether its chief Dominique Strauss-Kahn abused his power in an affair with a subordinate who has since left the global institution.

The subordinate, Piroska Nagy, a former senior economist at the IMF's Africa division, was not given preferential treatment before leaving the IMF in August, her lawyer said.

The investigation of the IMF managing director comes as several countries turn to the fund for financing to help ease the effects of the worst global financial crisis since the Great Depression and politicians consider its role in preventing future crises.

The Washington-based lender said in a statement the investigation was ordered by Shakour Shaalan, head of the IMF's 24-member board, after the matter came to his attention during the summer. It is being handled by an outside law firm and is to be completed by the end of October.

"All allegations, particularly those involving senior management, are taken extremely seriously," an IMF spokesman said. "The dean has asked external counsel to conduct an independent investigation and determine the validity of the allegations," the spokesman added.

Strauss-Kahn, a former French finance minister who came to the job just under a year ago, said he was cooperating with the investigation.

"With my full support the IMF is examining an incident which occurred in my private life in January 2008," Strauss-Kahn said in a statement. "I have cooperated and am continuing to cooperate with outside counsel to the Fund concerning the matter."

"At no time did I abuse my position as the fund's managing director," he said.

Nagy's lawyer, Robert Litt of Arnold & Porter said his client took a buyout package in August, along with other IMF staff in a cost cutting drive, and was not pressured to leave.

"She accepted a severance package that was generally available, and the terms were the same as were available to others of her grade and seniority," Litt said in an e-mailed response to Reuters.

"She received no special treatment of any kind, either favorable or unfavorable, and she was not pressured to leave," he said.

The IMF probe follows more than a year after former World Bank President Paul Wolfowitz was forced to resign amid a staff uproar over a high-paying promotion he authorized for his companion who worked at the bank.

INTERNAL CRITICISM

The London-based European Bank for Reconstruction and Development, where Nagy now works, was not aware of the IMF investigation, a spokesman said. Nagy was a highly qualified senior economist who worked on banking issues, he said.

The Wall Street Journal reported on Saturday that Strauss-Kahn approached Nagy, who is married, in December 2007 and the two exchanged e-mails which led to the relationship early this year.

It said Nagy's husband, Mario Blejer, a highly regarded international economist and former head of the Argentine Central Bank and an advisor to the Bank of England, found e-mail evidence of the affair when it ended.

The newspaper said the case was provoking criticism within the IMF because not all 24 members of the board were aware of the investigation until Friday.

Internal critics said members who had knowledge of the allegations may have been able to use that information in policy and funding disputes with Strauss-Kahn, the paper said.

Strauss-Kahn came to the IMF with a reputation as a ladies man and his marriage to high-profile TV interviewer Anne Sinclair has guaranteed him tabloid coverage in France.

He returns frequently to France and is seen as someone who could take over as the next head of the Socialist party. An Opinionway poll released on Thursday said 60 percent of French people thought French President Nicolas Sarkozy was managing the financial crisis well, but a quarter of those surveyed thought Strauss-Kahn would do a better job.

Date created : 2008-10-19

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