Presiding judge Martine Ract Madoux forced the head of the International Monetary Fund on the defensive as she questioned why 45 million euros (USD 48 million) had been paid to Bernard Tapie in personal damages.
These so-called "moral damages" -- to compensate for his emotional and physical suffering -- were part of a 404 million euro settlement with Tapie in 2008 over a case he brought against the state.
"The heart of this case are the moral damages of 45 million euros, even though... Moral damages for the death of a child are between 30,000 and 50,000 euros. Ultimately, it's a colossal figure," said Ract Madoux.
Lagarde has been charged with negligence over the settlement with Tapie, the former owner of sportswear giant Adidas and an ally of former president Nicolas Sarkozy.
More From This Section
Tapie, a former government minister now aged 73, owned Adidas between 1990 and 1993 but lost control of it when he went bankrupt.
He sold it to state-owned bank Credit Lyonnais for 315.5 million euros in February 1993. The bank sold Adidas the year after at 701 million euros, leading Tapie to claim he had been cheated.
The decision was hugely costly, with Tapie initially walking away with 404 million euros. After a lengthy court battle, he was ordered to repay the money.
Investigators suspect the arbitration process was rigged in favour of Tapie, who had supported Sarkozy in his 2007 election campaign. One of the arbitrators also had links to the businessman.
If found guilty, the IMF managing director could receive a maximum one-year prison sentence and a 15,000 euro ($15,900) fine.
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.