By Lesley Wroughton
WASHINGTON (Reuters) - International Monetary Fund chief, Dominique Strauss-Kahn, on Monday apologized for "an error of judgement" in an affair with a subordinate, but denied he had abused his position.
In a staff memo after meeting with the fund's board, Strauss-Kahn apologized to employees, the woman he had the affair with, Piroska Nagy, and his wife, French television personality Anne Sinclair, for the trouble it had caused.
IMF officials said Strauss-Kahn had not resigned. The scandal comes as the IMF deals with the worst financial crisis since the 1930s and emerging economies turn to it for policy advice and financing.
It also follows the resignation last year of World Bank President Paul Wolfowitz over a high-paying promotion he authorized for his companion, who worked at the bank.
An IMF investigation, being conducted by an outside lawyer, is looking into whether Strauss-Kahn gave Nagy, a senior economist in the Africa Department at the time, preferential treatment before she took a staff buyout offer in August.
Her lawyer, Robert Litt of Arnold & Porter, told Reuters his client had not received special treatment and was not pressured to leave. She is now working for the European Bank for Reconstruction and Development in London.
"I apologized and said that I very much regret this incident," Strauss-Kahn, a former French finance minister, said in the staff e-mail.
"Second, while this incident constituted an error of judgement on my part, for which I take full responsibility, I firmly believe that I have not abused my position," he said.
"Third, I fully support the process that is under way and I will, of course, follow the board's guidance as to how best to resolve this matter."
IMF officials said the investigating lawyer would question Strauss-Kahn and submit a report by the end of the week.
The officials said Strauss-Kahn expressed deep regret in a meeting on Monday with the IMF board of member countries.
THIRD-PARTY COMPLAINT
Board chief Shakour Shaalan, who represents Egypt and other Arab nations, said the investigation was launched after third-party claims of improper behaviour by Strauss-Kahn.
Strauss-Kahn said he regretted the problems the incident had caused for Nagy, whom he praised as a talented economist.
"I want to apologise to the staff member concerned for my error in initiating this relationship," he said. "I acknowledge and regret the difficult situation this has created for her. I also apologise to my wife and family," he added.
He told the IMF staff to focus on their work during the critical days of the financial crisis.
On her blog on Sunday, Strauss-Kahn's wife said, "For my part, this one-night stand is now behind us; we have turned the page."
Nagy's husband, Mario Blejer, a former Argentine central bank governor and Bank of England adviser, told Argentine radio the couple has been separated for several years.
(Editing by Doina Chiacu)
