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IMF moves to bolster ethics rules prompted by ex-chief’s 2008 affair

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As it copes with the fallout from its former chief’s arrest on sexual-assault charges, the International Monetary Fund is still working to recover from Dominique Strauss-Kahn’s 2008 affair with a staff member — an incident that triggered reform of the agency’s ethics laws and new training programs for employees.

On May 6, the agency put in place new rules ordering staff members to disclose relationships that develop among them so that any conflict of interest can be resolved. That was not required in 2008, when Strauss-Kahn had an affair with IMF staffer Piroska Nagy. After a board investigation, he kept his job.

Virginia Canter, the IMF’s ethics officer and a former White House associate counsel, said she is also rolling out new harassment training programs for the IMF’s 2,400-person staff and hopes to make them mandatory. She has already held personal training sessions with about 400 managers and new employees.

In an interview, she said there was nothing about Strauss-Kahn’s arrest last weekend while on a private trip to New York that she felt warranted a review of the IMF’s ethics policies. She said she regarded the policies as “solid” following the recent revisions. Those changes toughened the harassment and ethics rules for all employees, including the managing director, in line with recommendations made by an outside lawyer who investigated Strauss-Kahn’s 2008 affair. Like the World Bank and similar international institutions, the IMF is not subject to U.S. workplace laws.

“I did not have a heart attack when I walked in here” and took over the IMF ethics operation in 2010, Canter said. Of the internal ethics breaches alleged during 2009 and 2010, none related to sexual harassment between managers and subordinates, she said.

The former IMF chief, until this week a possible contender for the French presidency, was released from New York’s Rikers Island jail Friday after posting $1 million bail and agreeing to electronic monitoring of his movements and 24-hour-a-day surveillance by an armed guard. He will be confined to a New York apartment until trial, although it is unclear which one: His initial attempt to secure lodging fell through after building residents complained about the media attention and potential disruption.

Also on Friday, the IMF board set new procedures for choosing Strauss-Kahn’s replacement, which open the door for non-Europeans to compete for the post. By tradition, the IMF’s top job since World War II has been held by a European, but the process outlined by the board allows any of the fund’s members to nominate a candidate. Nominations will be accepted until June 10. The board said it will develop a short­list of three candidates to interview and try to make a decision “by consensus” by July 1.

That puts the process on a faster track than the three months needed for Strauss-Kahn’s selection, but it also is a response to developing nations’ calls for a more open competition and clearer selection process.

Strauss-Kahn’s indictment on seven counts, including attempted rape, has refocused attention on the 2008 staff affair and what some believe is lax oversight of the fund’s top management by its 24-member executive board.

An outside investigation by the Morgan Lewis law firm resulted in a reprimand by the board and an apology by Strauss-Kahn for a lapse in judgment.

The body — in part appointed by major powers like the United States and chosen by groups of smaller nations assembled from among the IMF’s members — is a “resident board,” meaning its members are paid a full-time salary of $230,000 a year and have offices at IMF’s headquarters. While expected to oversee the managing director, they also work with him and other staff on a day-to-day basis.

The same people who review the managing director’s performance — or, in Strauss-Kahn’s case, decided to keep him despite the Nagy affair — might also make appeals to him if their country needs help. The senior member and “dean” of the board is A. Shakour Shaalan, an Egyptian who was a veteran of the IMF staff before joining the executive board in 1992, where he has since remained, representing a collection of Arab states.

Shaalan, 82, did not respond to requests for an interview.

“It is a really widespread concern,” said one former executive director, who spoke on the condition of anonymity because of the sensitivity of the issue. “They want a favorable report [for their country], then they are supposed to oversee the managing director and the functioning of the institution. There is an inevitable tension. They are structurally dependent on the managing director.”

The U.S. executive director, Meg Lundsager, appointed by the Treasury Department, did not respond to an interview request.

The changes underway at the IMF in part track policies developed at its sister organization, the World Bank, which went through its own soul-searching after then-president Paul Wolfowitz’s resignation over pay and other benefits given to a female staffer.

The World Bank considers relationships between an employee and a manager “a de facto conflict of interest” and requires employees to take mandatory training on misconduct, including sexual harassment.

Female IMF staff said in interviews that they, like all employees at the agency, were rattled by Strauss-Kahn’s arrest, but they were hesitant to criticize the board’s decision to retain him and said they thought his behavior was not representative of the agency.

Staff writer Brady Dennis in New York contributed to this report.

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