Paris: A French prosecutor on Friday said IMF chief Christine Lagarde should stand trial for her handling of a massive state payout to tycoon Bernard Tapie in 2008 when she was France`s finance minister.


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The prosecutor recommended the rejection of a challenge by Lagarde to a December court order for her to stand trial for negligence in the affair, which saw Tapie receive 404 million euros ($433 million) in taxpayer money.


The ruling is expected on July 22.


If the order is upheld, Lagarde, 60, will be tried in the Law Court of the Republic, which handles cases concerning offences committed by sitting government ministers.


Lagarde was placed under formal investigation in 2014 for negligence in a protracted legal drama pitting Tapie against a bank which he accused of defrauding him during his sale of sports clothing giant Adidas in the 1990s.


Lagarde, who faces a year in jail if convicted as well as fine of 15,000 euros ($16,000), has denied wrongdoing or that she acted on then president Nicolas Sarkozy`s orders.


She was finance minister under Sarkozy in 2008 when she decided to allow arbitration in the dispute between Tapie and partly state-owned Credit Lyonnais.


As a result of the arbitration, Tapie was awarded the payout to be made by a state-run body in charge of settling the bank`s debts.


The negligence charge comes over Lagarde`s allowing the private arbitration and her failure to challenge the award, which was hugely beneficial to Tapie but prejudicial to the state.


Tapie was ordered to repay the award to the government in February 2015. 


Despite her legal woes, the International Monetary Fund board in February named Lagarde to a second term as managing director, which officially starts next week.