Piroska Nagy Affair: IMF Chief Dominique Strauss-Kahn

Former IMF economist Piroska Nagy seen at a meeting in 2002.

The Chief of the International Monetary Fund, one of the most important financial organizations in the world, has been cleared of any wrong doing by the executive board of the organization after a scandal involving his extramarital relationship with a subordinate, economist Piroska Nagy.

Dominique Strauss-Kahn was investigated for favouritism and abuse of authority, but the IMF board released a statement early Sunday indicating that DSK was clear to continue his job. The IMF is currently at the centre of a number of international rescue plans for ailing world economies such as the Ukraine, Iceland and Pakistan.

The scandal threatened to distract the IMF and world leaders from the difficult task of negotiating a solution to the current Global Financial meltdown seen across the world.

Dominique Strauss-Kahn, who admitted to having an affair with subordinate Piroska Nagy, was cleared of any wrongdoing in connection with his relationship with a female employee while faulting him for a ``serious error of judgment.''

From Bloomberg:

An investigation by the fund's board ``concluded that there was no harassment, favoritism, or any other abuse of authority,'' a statement by the Washington-based agency said yesterday. ``Nevertheless, the Executive Board noted that the incident was regrettable and reflected a serious error of judgment on the part of the managing director.''

The report said Strauss-Kahn made ``initial contact'' with a female staff member, who wasn't identified, concerning ``legitimate IMF business.'' There followed ``a two-week-long exchange of consensual and very personal messages.'' In early January the two engaged in a ``consensual physical relationship of short duration.''

The scandal came about a year after a similar situation developed at the other major Bretton Woods born Washington DC organization, involving former Bush White house official Paul Wolfowitz, at the World Bank.