IMF probing chief's relation with worker

New York, Oct 18 (IANS) The International Monetary Fund (IMF) is investigating whether its chief, Dominique Strauss-Kahn, abused his position in connection with a brief affair with a female subordinate at a time when the key multilateral institution is focusing on helping developing countries withstand the global financial crisis.

The law firm hired by the IMF is expected to complete the investigation by the end of the month, the Wall Street Journal reported Saturday.

The probe was sought by the longest-serving member of the Fund's governing board, A. Shakour Shaalan, who represents Egypt and other Arab countries, with advice from the representatives of Russia and the US.

'There was an allegation concerning improper behaviour of a personal nature on the part of the managing director,' Masood Ahmed, IMF's chief spokesman, was quoted as saying by the paper. 'All allegations, particularly relating to senior management, need to be investigated.'

Strauss-Kahn has accepted that the 'incident which occurred in my private life' took place in January 2008, but said, 'At no time did I abuse my position as the Fund's managing director.'

Former French finance minister, Strauss-Kahn, 59, was elected managing director of the IMF in September 2007. He has said he is cooperating with the investigators.

The woman in question is Hungarian-raised Piroska Nagy, at the time a senior official in the IMF's Africa department. The Journal was told by some people familiar with the matter that Strauss-Kahn approached a married Nagy in December 2007 for an affair, which commenced early this year during a conference in Europe.

But soon after, Nagy's husband, Mario Blejer, an Argentine-born economist who has also worked at the IMF, found email evidence of the affair, and it apparently ended, the Journal said.

Nagy resigned from the IMF in August as the IMF was cutting nearly 600 positions.

One issue for Morgan, Lewis & Bockius LLP, the investigating agency retained in late August, is whether Strauss-Kahn showed favouritism to Nagy at the IMF, or conversely, sought retribution. They are also looking at whether her severance package was outsized for a person of her position and tenure.

The IMF probe comes 15 months after the president of the World Bank, Paul Wolfowitz, resigned in the midst of allegations of favouritism to a subordinate with whom he had a long-standing relationship. The question then was whether Wolfowitz's girlfriend received a big increase in salary as a result of their relationship.

By promptly probing the charges against Strauss-Kahn, the IMF hopes to avoid some of the controversy that struck the World Bank. But, as Michael Mussa, former IMF chief economist, told the Journal, 'If the allegations [that he abused his position] are true, I think [Strauss-Kahn] would have to go.'