IMF's Lagarde signs up to tougher ethics code

By Lesley Wroughton

WASHINGTON (Reuters) - Christine Lagarde, who took office as IMF managing director on Tuesday, has signed up for tougher ethical rules than her predecessor as the lender seeks to inoculate itself from further hits to its reputation in the aftermath of Dominique Strauss-Kahn's resignation under fire.

"The contract makes more explicit the higher standards of ethics behavior," IMF spokesman William Murray told Reuters.

The language in the contract draws from new staff conduct rules published by the IMF in May.

Those rules were issued in response to a 2008 affair then-IMF chief Strauss-Kahn had with a female staff economist. Strauss-Kahn was cleared by the board of harassment and abuse of power, although he apologized for an "error of judgment."

Strauss-Kahn resigned on May 18 to fight charges he sexually assaulted a hotel maid. Sources familiar with the case say prosecutors now have doubts about the maid's credibility as a witness, raising the prospect the case could be dropped.

Lagarde's contract holds her to "highest standards of ethical conduct consistent with the values of integrity, impartiality and discretion."

It also requires her to avoid "even the appearance of impropriety." Further, it states that "in the performance of your duties as managing director, you have an exclusive duty of loyalty to the fund and shall avoid any conflict of interest or the appearance of such a conflict."

Also new is a requirement that she participate in an ethics training program mandatory for all IMF staff.

The contract also forbids her from attending political party meetings in a personal capacity or engaging in partisan political activity, a nod by the IMF board to its unhappiness over reports that Strauss-Kahn had attended meetings of France's Socialist Party while he was managing director.

However, she may be a member of a political party and contribute funds to a political candidate.

Strauss-Kahn's contract on ethics stated only that he "shall observe the standards of conduct applicable to staff members ... and should avoid any conflict of interest, or the appearance of such conflict."

Lagarde will earn $467,940 a year, net of income taxes, plus an allowance of $84,000, according to her contract published on Tuesday. The fund will also cover her expenses and give her a staff retirement and pension plan.

(Editing by Eric Walsh)