MercoPress. South Atlantic News Agency

IMF head investigated over sex scandal with employee

IMF boss Strauss-Kahn & Piroska Nagy and economist Mario Blejer

The International Monetary Fund is investigating allegations that its chief, Dominique Strauss-Kahn, had an improper relationship with a female employee. IMF lawyers have opened an independent probe into the charges, first reported Saturday by The Wall Street Journal.

The probe will look into whether Strauss-Khan abused his power as IMF managing director by showing favoritism to Piroska Nagy - an IMF official who has since left the fund. Strauss-Kahn is a former French finance minister. He denies ever abusing his position at the fund, and says he is cooperating with investigators. A report on the case is expected by the end of the month. The case began in January when Mario Blejer, a senior Argentine economist, (Bank of England and Argentine Central Bank) discovered that Piroska Nagy, his wife, had been seduced by her boss at the Davos international forum. The incident is seen as damaging for French president Nicholas Sarkozy who is playing a leading role in the restructuring of the world financial system. Although the romantic troubles of Mr. Strauss-Kahn were known in Paris, some politicians suggested that the case had been leaked to the US media to undermine the French effort. President Sarkozy was furious that Mr. Strauss-Kahn, who is married to Anne Sinclair, a television news presenter, had risked a chance to restart his career and to help France internationally by living up to his old name as "a grand seducteur", the term used by Le Journal du Dimanche. Ms Sinclair said that the couple had put the affair behind them. Paris had been hoping that no news would break until Mr Strauss-Kahn had been cleared later this month. Allies of Mr Strauss-Kahn and some commentators dismissed the affair as another episode of hysteria by puritanical US institutions. International organizations have strict rules regarding relations among staff. Last year, Paul Wolfowitz resigned from his position as World Bank president after authorities found he had arranged a promotion and generous pay package for his bank employee girlfriend. From Buenos Aires it was reported that the former president of the Argentine Central Bank Blejer indicated that although nor formally divorced, he has been separated from his wife Piroska for over four years. Furthermore while she was working for the IMF "I was in London as advisor to the Bank of England", said Blejer who emphasized "I didn't discover the affair, I didn't talk to the IMF about it, what is being published is totally false and made up".