IMF Investigates Chief's Relationship With Ex-Employee

WASHINGTON – The International Monetary Fund, a key institution in the global financial crisis, has hired a law firm to investigate whether its chief had an improper relationship with a female employee.

Allegations regarding IMF Managing Director Dominique Strauss-Kahn's relationship with the employee were first brought to the attention of the dean of the fund's executive board, A. Shakour Shaalan, this summer, said William Murray, a monetary fund spokesman.

The fund has hired the law firm Morgan, Lewis, & Bockius to conduct the investigation, Murray said. The firm is expected to report to the IMF executive board on the findings of the investigation by the end of this month, he said.

The investigation was first reported Saturday by The Wall Street Journal, which identified the woman involved as Piroska Nagy, now with the European Bank for Reconstruction and Development in London.

A spokesman at the EBRD in London said he was unaware of the inquiry. In Washington, an attorney for Nagy, Robert Litt, said that she received no special treatment of any kind, either favorable or unfavorable, and that she left voluntarily in August. Litt said Nagy does not comment on her personal life.

Murray declined to comment on the details of the allegations against Strauss-Kahn, except to say that the fund is exploring his "relationship with an employee and whether there were any benefits from that relationship."

"The managing director is fully supportive of this process and wants the facts to be established as quickly as possible," Murray said.

Strauss-Kahn, 59, said in a statement: "With my full support the IMF is examining an incident which occurred in my private life in January 2008. I have cooperated and am continuing to cooperate with outside counsel to the fund concerning the matter.

"At no time did I abuse my position as the fund's managing director. I look forward to the report of outside counsel."

The scandal comes 15 months after Paul Wolfowitz resigned as World Bank president amid a controversy over a pay package for his girlfriend, a bank employee.

Strauss-Kahn, a former French finance minister, was nominated last year by the European Union to head the IMF. French President Nicolas Sarkozy had canvassed the U.S. and other European countries for their support even though Strauss-Kahn is a Socialist who earlier said it would be a "betrayal" for him to join Sarkozy's government.

The IMF is currently focusing its efforts on trying to help emerging markets in developing countries withstand the worldwide financial crisis.