Interim IMF Chief Says Strauss-Kahn's '08 Affair Was 'Serious Breach'

May 20, 2011
Originally published on May 20, 2011 7:21 pm

Since Dominique Strauss-Kahn was arrested last weekend for an alleged sexual assault on a Manhattan hotel maid, there's been attention paid to the culture at the International Monetary Fund, which he headed.

Today's New York Times includes this headline: "At I.M.F., Men On Prowl And Women On Guard."

"Some women avoid wearing skirts for fear of attracting unwanted attention," the Times reported. "Others trade whispered tips about overly forward bosses. A 2008 internal review found few restraints on the conduct of senior managers, concluding that 'the absence of public ethics scandals seems to be more a consequence of luck than good planning and action.' "

In a conversation taped for today's All Things Considered, host Robert Siegel asked acting IMF Managing Director John Lipsky about the culture at the IMF and about its handling of an affair that Strauss-Kahn had with a subordinate.

"The idea that somehow it's OK for a relationship between a supervisor and subordinate to carry on is just simply, absolutely not the case," Lipsky said.

But Strauss-Kahn was only reprimanded in 2008, not dismissed, Robert noted. Did that indicate his actions were OK?

"I don't think it was decided as OK," Lipsky said. "It was [deemed] a serious breach of judgment."

During the interview, Robert also talked with Lipsky about the search for a new IMF managing director. Lipsky said there will be an "open" process as the search continues, and that he understands that means candidates from outside Europe — which by tradition has been the source for IMF chiefs — will be seriously considered.

Reuters reports that European leaders are pushing for French Economy Minister Christine Lagarde to get the job.

Lipsky and Robert also discussed global economic conditions. According to Lipsky, "global growth ... in the past year was about 5 percent at an annual rate. That's relatively strong."

But, he added, "the advanced economies grew on average 2.5 percent. That's just not fast enough to make a big dent in ... unemployment." Emerging economies, meanwhile, grew about 6.5 percent and many have "inflation pressures."

"We hope the recovery can be strengthened through a cooperative set of policy adjustments," he said, in which the emerging economies "shift the source of their growth" from exports to "domestic demand," while the U.S. and other major economic powers focus more on exports.

Much more from their conversation is due on today's All Things Considered. Click here to find an NPR station that broadcasts or streams the show. Later, we'll add the as-broadcast version of the interview to the top of this post.

Update at 3:15 p.m. ET. The Times reports that Strauss-Kahn "must find another place to stay when he leaves his Rikers Island jail cell because the Upper East Side building where his wife had rented an apartment will not accept him, a court official said on Friday."

He is to be released to "house detention" and after posting $1 million bail.

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ROBERT SIEGEL, Host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, Host:

And I'm Michele Norris.

The former head of the International Monetary Fund was released on bail today from New York's Rikers Island jail. Dominique Strauss-Kahn resigned his position at the IMF following his arrest on sexual assault charges.

SIEGEL: John Lipsky is the acting managing director of the International Monetary Fund. He's an American economist who's worked for investment banks but for many years at the fund where he rose to the number two job. And now, the resignation of Dominique Strauss-Kahn makes him the interim boss.

Welcome to the program. I don't know if congratulations are in order, but congratulations.

JOHN LIPSKY: Thank you.

SIEGEL: Dominique Strauss-Kahn was widely praised for reinvigorating the International Monetary Fund. How much damage has his abrupt resignation and the scandal done to the IMF?

LIPSKY: Well, of course, we're all shocked and saddened by these circumstances and these turn of events. But this is an organization of 2,400 people. It has some of the most talented economists in the world. Some extremely experienced and dedicated international civil servants focused on their job while we await the naming of a new managing director.

SIEGEL: By tradition, the managing director of the International Monetary Fund is a European. As far as you're concerned, is that tradition intact? Is it necessary, given how Central Europe is at the moment, to the concerns of the IMF? What would you say?

LIPSKY: Well, first, there's agreement among the membership on a selection process should be open, transparent and merit-based. To my mind, open means no one excluded, everyone potentially included. We're hopeful that an open and transparent process will produce the best candidate with the full support of the membership.

SIEGEL: You mentioned the shock with which the news of Dominique Strauss-Kahn's arrest was received at the fund. And I don't want to pursue anything about the allegations against him with you. But it is a matter of public record that not too long ago, the fund reprimanded the managing director for an affair with an IMF staffer but allowed him to stay on.

The ethics standards at the IMF did not prohibit a romance between supervisors and subordinates. Is there any self-examination going on right now at the fund about its standards of ethics and behavior among the staff?

LIPSKY: Let me make two clarifying points, if you will. One is there is a very clear code of conduct for staff and a very clear mechanism for ensuring compliance. And the - for the managing director, there is a process run by the executive board. So the decisions regarding the managing director with regard to ethical issues was taken by the executive board.

With regard to the staff, there are very clear standards that are - absolutely meet the relevant best practice. And what you said is not exactly correct. Of course, in a large organization, it's only realistic to expect the possibility of romantic relationships develop between staff members. But where there is a potential for conflict of interest, such as you described, a reporting relationship, it is incumbent for that relationship to be reported and the potential conflicts resolved.

So the idea that somehow it's OK for a relationship between a supervisor and subordinate to carry on is just absolutely not the case.

SIEGEL: But is it inaccurate to say that the resolution of that particular case involving Mr. Strauss-Kahn himself, that in the end, it was a reprimand, but as it was continuing at work, it was OK? It was decided to be not fatal.

LIPSKY: Oh, I don't think it was decided as OK. It was...

SIEGEL: He kept his job.

LIPSKY: ...branded a serious breach of judgment. But again, this was a decision of the executive board. With regard to staff members, the standards are clear that these potential conflicts have got to be resolved.

SIEGEL: Well, John Lipsky, acting managing director of the International Monetary Fund, thank you very much for talking with us.

LIPSKY: Thank you. Transcript provided by NPR, Copyright NPR.