• Lagarde’s lawyer says he’s convinced allegations have no merit
• IMF chief could face as much as one year in jail if convicted

International Monetary Fund (IMF)Managing Director, Christine Lagarde must face a criminal trial for her handling of a dispute during her time as French finance minister, a ruling that could hamper her second term as head of the world’s lender of last resort.

According to Bloomberg.com, the Cour de Cassation backed a December decision that Lagarde, 60, should stand trial for alleged negligence that paved the way for a massive government payout to tycoon Bernard Tapie. While the threat of a trial has clouded her tenure at the IMF, she was handed a second five-year term as managing director in February.

Lagarde is accused of failing to block an arbitration process in 2008 that brought to an end the longstanding dispute between former state-owned bank, Credit Lyonnais and Tapie, a businessman and supporter of then French President Nicolas Sarkozy. Tapie walked away with an initial award of about 285 million euros ($314 million) before it was cut to zero by an appeals court.

The charge of negligence in the use of public funds carries a maximum penalty of one year in prison and a fine of 15,000 euros. She will stand trial at a specialized panel that deals with ministers accused of crimes related to their positions known as the Cour de Justice.

“I am convinced that the court will find the allegations of negligence to be without merit,” Lagarde’s lawyer Patrick Maisonneuve said in a statement.