May 20, 2011

IMF Looks for Quick Succession to Strauss-Kahn

Nomination needed before G8 meeting; new rules make harassment cause for dismissal

As a G8 summit nears next week, European leaders are looking for a quick nomination to succeed Dominique Strauss-Kahn as head of the International Monetary Fund (IMF).

Strauss-Kahn, who is scheduled to be released from Rikers Island to house arrest on bail of $1 million for a charge of sexual assault, resigned his position late Wednesday in a letter released by the IMF on Thursday morning. Also on Thursday, the IMF released new rules that provide for dismissal in the case of harassment or abuse of power—allegations previously made against Strauss-Kahn but dismissed by the IMF’s board.

Reuters reported that European nations were scrambling to garner support for Christine Lagarde, finance minister of France, currently seen as the front-running candidate. They prefer to keep a European as head of the institution during the ongoing debt crisis negotiations. Lagarde received endorsements from Silvio Berlusconi, prime minister of Italy, and Jean-Claude Juncker, chairman of the euro zone finance ministers, on Thursday.

But emerging market countries such as China, Mexico, and Brazil have all suggested that it is time for Europe to give up the top slot, though they so far have not united behind a single candidate.

Her appointment is by no means assured. Currently a special court is considering whether she should be investigated for abuse of power in an arbitration settlement. Belgium has questioned whether Lagarde should be appointed until the outcome of that case has been determined, but the court will not reach its decision till mid-June. Didier Reynders, Belgium’s finance minister, is said to have his own ambitions to lead the IMF; Lagarde says that she is the target of a smear campaign.

The new rules concerning harassment and abuse of power were approved by the IMF on May 6, but were only published Thursday. Under the new rules, an affair between a supervisor and a subordinate presents a potential conflict of interest. IMF spokesman William Murray said in the report, "Failure to report and then resolve the potential conflict of interest constitutes misconduct and is grounds for disciplinary action. Under some circumstances, such a relationship may also constitute harassment and would be investigated. If found to exist, harassment is grounds for disciplinary action up to and including dismissal."

Strauss-Kahn had an affair with a subordinate economist at the IMF in 2008. He apologized for an “error in judgment,” but economist Piroska Nagy said he had abused his position in the way he approached her. She said in a statement to an independent investigator, “Despite my long professional life, I was unprepared by advances by the managing director of the IMF. I did not know how to handle this; ... I felt that I was 'damned if I did and damned if I didn't.' It is, in my view, incontestable that Mr. Strauss-Kahn made use of his position to obtain access to me.”

There have been constant rumors over Strauss-Kahn’s involvement with women, and on Thursday a former madam in New York said that Strauss-Kahn had used her escort service. A Times of Londonreport said that Kristin Davis reported in an affidavit that the former IMF chief had patronized the service twice in 2006.

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