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PARIS (Reuters) - International Monetary Fund chief Christine Lagarde pledged to fight "allegation by allegation" charges of negligence when she went on trial in Paris on Monday over her role in a huge payout by the French state to businessman Bernard Tapie in 2008.
Lagarde, 60, was France's finance minister in the government of then-president Nicolas Sarkozy when she approved an out-of-court settlement with Tapie to end a long-running dispute between the magnate and the French state.
The decision to accept an extremely rare private arbitration ended up costing French taxpayers more than 400 million euros (334.55 million pound) in a payout to Tapie.
Accused of negligence leading to misuse of public funds, Lagarde denies any wrongdoing. She risks up to a year in jail and a fine of 15,000 euros ($15,895) if convicted.
Were it to happen, a maximum sentence could raise questions about the widely respected policymaker's ability to continue as head of the Washington-based IMF, where her French predecessor Dominique Strauss Kahn quit in 2011 over a sex assault scandal.
"I would like to show you that I am in no way guilty of negligence, but rather that I acted in good faith with only the public interest in mind," she said in the opening hearing.
"Was I negligent? No. And I will strive to convince you allegation by allegation," she said, expressing surprise at the harsh tone of the charges against her.
Investigators have said that Lagarde's behaviour in the case went beyond simple carelessness.
Her trial is only the fifth to be held before the Cour de Justice de la Republique, a special tribunal created in 1993 to try cabinet ministers.
A panel of 15, including 12 lawmakers from both the lower and upper houses of parliament, will hear the case, which is scheduled to run until Dec. 20.
They are expected to focus on correspondence between Lagarde and her staff as well as the government body that manages state corporate holdings, which advised against private arbitration.
The case dates back to a time when Tapie sued the state for compensation after selling his stake in sports company Adidas to then state-owned Credit Lyonnais in 1993.
He accused the bank of defrauding him after it resold its stake for a much higher price. With the case stuck in the courts, the two sides agreed to a private settlement and Tapie was awarded a 403 million euro payout, including interest.
Reporting by Chine Labbe; Writing by Leigh Thomas; Editing by Richard Balmforth and Catherine Evans