Dominique Strauss-Kahn admitted ‘error of judgment’ in 2008 sex case

The arrest of Dominique Strauss-Kahn on sexual assault and attempted rape charges has prompted fresh scrutiny of the International Monetary Fund's dismissal of accusations that its director abused his power to pressure a subordinate into sleeping with him three years ago.

The charges against Strauss-Kahn for allegedly assaulting a hotel chambermaid have brought fresh revelations about the French former finance minister's treatment of women, including his alleged assault of a journalist in 2002.

They have added weight to claims by Piroska Nagy, a Hungarian-born economist, that the fund's director engaged in sustained harassment when she was working at the IMF that left her feeling she had little choice but to agree to sleep with him at the World Economic Forum in Davos in January 2008.

In a letter to investigators, she described Strauss-Khan as "a man with a problem that may make him ill-equipped to lead an institution where women work under his command".

Strauss-Kahn, who is being held at the notorious Rikers Island penal complex in New York, was denied bail on Monday at a court appearance when prosecutors successfully argued he was a flight risk. The head of the IMF denies the charges against him.

Nagy has accused Strauss-Kahn of abusing his position to make advances to her. She said there were several occasions when he called her with "inappropriate suggestions".

She alleged he persistently called and emailed on the pretext of asking questions about Ghana's economy but then used sexual language and asked her out.

Nagy, who now works for the European Bank for Reconstruction and Development in London, expressed her concern about Strauss-Kahn's behaviour in an October 2008 letter to Robert Smith, a partner at the law firm of Morgan Lewis & Bockius, which led an investigation on behalf of the IMF after the affair became public. "Despite my long professional life, I was unprepared for the advances of the managing director of the IMF. I did not know how to handle this; as I told you, I felt 'I was damned if I did and damned if I didn't'," she wrote.

Nagy said that, under the sustained pressure, she made the mistake of letting herself be dragged into a brief affair.

She wrote that she had no doubt Strauss-Kahn abused his position to gain access to her.

Nagy wrote that she had a high regard for Strauss-Kahn as a leader and a man with a vision of how to tackle the global financial crisis, but she feared he was a man with a problem, making him unsuited to head an institution in which he had authority over women.

Strauss-Kahn admitted the affair after Nagy's husband found out about it and told the IMF. He apologised, described it as an "error of judgment" but added that "I firmly believe that I have not abused my position". The investigation concurred and the IMF took no action against Strauss-Kahn other than to say that he had shown poor judgment.

But Nagy vigorously disagreed with that conclusion, accusing the law firm investigators in a letter of sidestepping the central issue of sustained harassment by Strauss-Kahn. Nagy ended the affair after her husband became aware of it and left the IMF shortly afterwards.

Nagy clearly feels bruised by the investigation, not only because her claims that Strauss-Kahn abused his position to pressure her into sex were not taken seriously but because there was a series of leaks intended to favour the IMF director's version of what happened.

Nagy said she was reluctant to co-operate with an internal IMF investigation because she feared publicity would hurt her family as well as Strauss-Kahn.

But after Smith was hired as an independent investigator, Nagy said she overcame her hesitation. However, leaks to the press backed Strauss-Kahn's claim he had not put pressure onNagy. She expressed disquiet that the leaks were intended to steer attention away from Strauss-Kahn's abuse of power.