IMF director gets to keep job despite affair

MF board opts not to fire director who had affair with subordinate

WASHINGTON (AP) -- The head of the International Monetary Fund will keep his job despite having an affair with a married subordinate, the agency's executive board concluded.

The IMF board issued a statement late Saturday saying that the actions of IMF Managing Director Dominique Strauss-Kahn were "regrettable and reflected a serious error of judgment."
However, the 24-member board of directors decided that Strauss-Kahn's relationship with the former IMF employee was consensual and did not involve any type of sexual harassment, favoritism or any abuse of authority.

The board, which represents all 185 member-nations of the lending institution, reached its conclusions at the end of a daylong meeting at IMF headquarters in Washington.

In a statement, the board said that based on the findings of an outside law firm hired to investigate the matter and discussions Saturday with Strauss-Kahn, that they now consider the incident closed.

Shakour Shaalan, the dean of the executive board, told reporters during a conference call that the board believed that the incident would not harm Strauss-Kahn's effectiveness going forward.

An investigative report by the law firm of Morgan, Lewis & Bockius said the two IMF employees acknowledged that there was "consensual physical relationship of short duration in January 2008."

The report noted there was no evidence that Strauss-Kahn "arranged for or provided the female staff member with any work-related benefit for participating in the affair." It also found no evidence that Strauss-Kahn "threatened the female staff member in any way" to keep the affair confidential.

The IMF is expected to play a critical role in providing loans to countries harmed by the current global financial crisis.

The former employee with whom Strauss-Kahn had the affair has been identified as Piroska Nagy, now in London with the European Bank for Reconstruction and Development.

The incident involving Strauss-Kahn occurred 15 months after Paul Wolfowitz resigned as president of the World Bank amid controversy over a pay package for his girlfriend, a bank employee. The World Bank is a sister lending institution to the IMF.

In a statement released with the board's findings, Strauss-Kahn, who became the IMF's 10th managing director a year ago, called what he did a "serious error of judgment" but said he was grateful that the board had found that he had not abused his authority.

"I very much regret this incident, and I accept responsibility for it," Strauss-Kahn said in his statement. "I have apologized for it to the board, to the staff of the IMF and to my family. I would also like to reiterate my apology to the staff member concerned for the distress this process has caused."