Lagarde put under investigation in fraud case: Report

IMF chief Christine Lagarde has been placed under formal investigation by French magistrates on Wednesday for her alleged role in a long-running political fraud case, a source close to the former French finance minister said.

The source said Lagarde, who earlier was questioned by magistrates in Paris under her existing status as a witness, considered their decision to investigate her for alleged "negligence" was unfounded and would appeal it. A French judiciary source also confirmed the step.

Gerry Rice, IMF Communications Director said in a statement e-mailed to CNBC that the Managing Director had already made a statement on the matter. "She is now on her way back to Washington and will, of course,brief the Board as soon as possible. Until then, we have no further comment."

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In French law, magistrates place someone under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.

Christine Lagarde
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Christine Lagarde

The inquiry into tycoon Bernard Tapie has embroiled several of former president Nicolas Sarkozy's cabinet members including Lagarde.

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Tapie - who supported Sarkozy in the last two elections - was awarded 403 million euros in a 2008 arbitration payment under Sarkozy's presidency to settle a dispute with the now defunct, state-owned bank Credit Lyonnais over a 1993 share sale. Lagarde was finance minister at the time.

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