A French prosecutor on Friday said IMF chief Christine Lagarde should stand trial for her handling of a massive state payout to tycoon Bernard Tapie in 2008 when she was France's finance minister.

The prosecutor recommended the rejection of a challenge by Lagarde to a December court order for her to stand trial for negligence in the affair, which saw Tapie receive 404 million euros ($433 million) in taxpayer money.

A ruling is expected on July 22.

If the order is upheld, 60-year-old Lagarde will be tried in the Law Court of the Republic, which handles cases concerning offences committed by sitting government ministers.

Despite her legal woes, the International Monetary Fund executive board in February named Lagarde to a second term as managing director, which officially starts next week.

Lagarde was placed under formal investigation in 2014 for negligence in a protracted legal drama pitting Tapie against a bank which he accused of defrauding him during his sale of sports clothing giant Adidas in the 1990s.

Lagarde, who faces a year in jail and a fine of 15,000 euros ($16,000) if convicted, has denied wrongdoing or that she acted on then president Nicolas Sarkozy's orders.

She said in December, with the IMF reiterating its confidence in her, that she "acted in the interest of the state, conforming to the law."

Lagarde was finance minister under Sarkozy in 2008 when she decided to allow arbitration in the dispute between Tapie and partly state-owned Credit Lyonnais.

As a result of the arbitration, Tapie was awarded the payout by a state-run body in charge of settling the bank's debts.

The cash payout to Tapie, who served jail time in the 1990s for match-fixing during his stint as owner of Marseille football club, was hugely controversial at the time.

- 'Fraudulent collaboration' -

The negligence charge stems from Lagarde's allowing the private arbitration and her failure to challenge the award.

A court later declared the arbitration fraudulent because one of the arbitrators had links to Tapie, now 73.

Investigators suspect the flamboyant businessman received preferential treatment in return for his high-profile support for Sarkozy.

Tapie and five others including his lawyer Maurice Lantourne and Pierre Estoup, who was a member of the arbitration panel, have been charged with committing fraud as part of an organised gang in connection with the payout.

And in February 2015, another court ordered Tapie to repay the award with interest, an order that has been upheld twice -- the second time on Thursday, with the judge citing "fraudulent collaboration" between the tycoon and Estoup.

French prosecutors last September called for the case against Lagarde to be dropped, but investigating judges decided to send her to trial.

Lagarde is in charge of the IMF's staff of 2,600 and more than $1 trillion (900 billion euros) in resources to be used to support struggling countries and, when needed, rescue them and shepherd them through often difficult reforms.

She arrived at the IMF in 2011 tasked with restoring the reputation of its leadership following her predecessor Dominique Strauss-Kahn, who resigned under the cloud of a sex scandal early that year.

The chic silver-haired mother of two sons has fashioned herself as an icon to talented women fighting male dominance in large organisations like the IMF.

Source: AFP