She arrived under the glare of television cameras at the Court of Justice of the Republic in Paris, a tribunal that hears cases against ministers.
The 60-year-old has been charged with negligence during her time as finance minister from 2007-2011 when she approved a payment to Bernard Tapie, the former owner of sportswear giant Adidas.
Tapie claimed a state-owned bank had defrauded him of hundreds of millions of euros when he lost control of the sports brand. Lagarde approved a settlement of 404 million euros (428 million dollars) in 2008.
Lagarde told the court she had been “profoundly shocked” by the conclusions of investigating judges who brought the case to court after deciding she had failed to question the deal.
“I acted in all honesty and in confidence with the public interest as my only objective,” Lagarde said, adding that she had perhaps been duped but “was I negligent? No.”
If found guilty, the IMF managing director could receive a maximum one-year prison sentence and a 15,000-euro ($15,900) fine.
Whatever the outcome, the case risks damaging the image of the former corporate lawyer who progressed through the finance ministry to become one of the world’s most powerful women and is still spoken of as a potential future French president.
Surrounded by television cameras at the start of proceedings and wearing a dark suit with a patterned scarf, Lagarde’s expressions alternated between awkward smiles and grimaces.
The case also threatens the credibility of the International Monetary Fund, as the former high-flying corporate lawyer is the third IMF chief to face trial.
The IMF has given its full backing to its yoga-loving boss, who began her second term in the post in July.
Her lawyer Patrick Maisonneuve on Monday dismissed speculation about what the IMF would do if she lost the case.
“She will be cleared so the question hasn’t even arisen,” he told Europe 1 radio.
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