PARIS IMF chief Christine Lagarde goes on trial on Monday for her role in a 400 million euro (£336 million) state payout to businessman Bernard Tapie in 2008 when she was France's finance minister.
The case has cast a rare shadow over Lagarde, who is widely respected in policy circles for helping the International Monetary Fund turn the page after her predecessor Dominique Strauss-Kahn resigned in 2011 over sexual assault charges.
Lagarde, 60, is accused of negligence for signing off on a highly unusual out-of-court settlement between the state and Tapie, a colourful French businessman with connections to then- president Nicolas Sarkozy.
Lagarde, who was France's finance minister from 2007 to 2011 before becoming IMF Managing Director, could face up to a year in jail and a fine of 15,000 euros if convicted.
A guilty verdict risks plunging the IMF into a new leadership crisis.
"She's very determined to defend herself," her lawyer, Patrick Maisonneuve, told Reuters.
The IMF's board "continues to express its confidence in the managing director's ability to effectively carry out her duties," IMF spokesman Gerry Rice told a news briefing in Washington on Thursday.
Lagarde, who was reappointed by the IMF to another five-year term in February, has been applauded by global finance leaders for her work at the IMF, where she has pushed member governments for stronger action to boost economic growth and engineered a historic move to include China's yuan into the fund's currency basket.
"Whether it is pressing for stronger and more inclusive growth or pushing back against the forces of protectionism, Christine’s approach is a combination of tireless effort and a focus on solutions," U.S. Treasury Secretary Jack Lew said in a statement to Reuters.
"On countless technical and challenging issues, she has an ability to reach across the globe to get the voices that need to be engaged involved," Lew said.
The case goes back to when Tapie sued the state for compensation after selling his stake in sports company Adidas to Credit Lyonnais in 1993.
He said the bank, owned by the French state at the time, had defrauded him after it later resold its stake for a much higher sum.
Tapie subsequently received 403 million euros in a settlement that was largely borne by the taxpayer.
The trial will be only the fifth heard by the Cour de Justice de la Republique, a special tribunal created in 1993 to try cases involving ministers.
A panel of 15 judges, including 12 lawmakers, will pore over notes between Lagarde and her staff as she has said she was not aware of some key details at the time of her decision.
Maisonneuve said the file had been largely dealt with by Lagarde's chief of staff Stephane Richard, now the chief executive of French telecoms group Orange, and that he had failed to pass on some necessary information.
In focus will be correspondence from the government body that manages the state's corporate holdings. It has said it opposed the idea of settling out of court, while Lagarde's lawyer says she followed the agency's instructions.
Richard, who faces a separate investigation for his role, has been called as a witness by the prosecution. He says he gave Lagarde all the information required and carried out her decisions in good faith.
The verdict, which can be appealed, is likely to come at the end of hearings due to run until Dec. 20, a judicial official said.
(Additional reporting by Lindsay Dunsmuir in Washington; Writing by Leigh Thomas; Editing by Richard Lough and Bill Trott)