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IMF chief Christine Lagarde's Paris apartment searched by police

Lisi Niesner / Reuters

International Monetary Fund (IMF) chief Christine Lagarde, seen in Frankfurt on Wednesday prior to the rain on her Paris apartment.

PARIS - French police searched the Paris apartment of International Monetary Fund chief Christine Lagarde on Wednesday as part of an investigation into misuse of public funds in her previous role as finance minister of France.

The probe centers on her awarding of a 2008 arbitration payment to a businessman supporter of ex-president Nicolas Sarkozy, her lawyer said.

Lagarde, who was serving in Sarkozy's government at the time, has repeatedly denied wrongdoing in ending a judicial battle against billionaire Bernard Tapie and instead opting for arbitration.

Investigating magistrates suspect her of complicity in embezzling public funds after she overruled objections from advisers to proceeding with the controversial $367 million to Tapie.

"This search will help uncover the truth, which will contribute to exonerating my client from any criminal wrongdoing," Lagarde's lawyer, Yves Repiquet, told Reuters.

It was conducted a day after France's budget minister resigned after being targeted in a tax fraud inquiry.

Socialist President Francois Hollande came to power last May vowing to crack down on the cozy relationships between politicians and businessmen he said were rife under Sarkozy.

Lagarde was in Frankfurt and not in her Paris flat at the time of the search, a spokesman for the IMF chief said.