Strauss-Kahn: Fund furore

Paris, Oct. 18 (Reuters): The International Monetary Fund (IMF) is investigating its boss, Dominique Strauss-Kahn, to see whether he abused his position in connection with a sexual relationship with a subordinate, the Wall Street Journal said today.

The investigation comes when Strauss-Kahn is in the middle of fire-fighting efforts in the global financial crisis. Only days ago, he addressed a meeting of world financial leaders in Washington.

The IMF had hired the law firm Morgan, Lewis & Bockius LLP in late August to carry out the investigation which is expected to be completed by the end of October, the Journal said.

It concerns Strauss-Kahn’s relationship with Piroska Nagy, at the time a senior official in the IMF’s Africa department. She resigned in August as the IMF reduced the size of its work force and now works at the European Bank for Reconstruction and Development.

The investigation is looking at whether Nagy, who is married to Argentine-born economist Mario Blejer, got a larger severance package than would otherwise have been expected. The investigation also looks at whether she was pressured to leave her job, whether Strauss-Kahn showed favouritism towards her or whether he sought retribution.

Robert Litt, Nagy’s lawyer, said: “She received no special treatment of any kind, either favourable or unfavourable.”

Investigators are also looking into allegations that he showed favouritism to another female employee. In a statement, Strauss-Kahn, a respected economist, said: “I have co-operated and am continuing to co-operate with outside counsel to the Fund concerning this matter.”

He said the “incident which occurred in my private life” took place in January 2008. “At no time did I abuse my position as the Fund’s managing director.”

The IMF is under the spotlight now as several countries have turned to it for finance to help ease the effects of the crisis and politicians consider the Fund’s role in preventing future crises. Strauss-Kahn is a former French finance minister who made an unsuccessful attempt to be the candidate for his Socialist party in the 2007 presidential elections. The Journal said the case was provoking criticism within the IMF because not all 24 members of the board were aware of the investigation until today.

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.