PARIS -- French prosecutors said Wednesday that Stéphane Richard, the chief executive of France Télécom, would be formally investigated for his role in a politically charged case that has already shined an uncomfortable spotlight on his former boss, Christine Lagarde, the managing director of the International Monetary Fund.
Mr. Richard, who denied wrongdoing, has been in police custody for questioning since Monday. He is being investigated on suspicion of organized fraud, according to a statement by the Paris prosecutor's office. In the French system, the start of a formal investigation signals that prosecutors think there is reason to believe a person was involved in a crime; the target is still presumed to be innocent, and the investigation may or may not lead to formal charges and a trial.
Prosecutors had been questioning Mr. Richard in the hospital, after he began feeling exhausted Monday following a long interrogation. Jean-Etienne Giamarchi, a lawyer for Mr. Richard, did not immediately reply to requests for comment.
Investigators are examining a 2008 arbitration case in which Bernard Tapie, a colorful businessman and former owner of the Olympique de Marseille soccer club, was awarded €403 million, or $535 million, to settle a long-running dispute with Crédit Lyonnais, a state-owned bank.
Mr. Tapie had been a career Socialist, even serving as a minister under the administration of François Mitterrand, but he switched his allegiance in 2007 to the center-right Union for a Popular Movement led by then-President Nicolas Sarkozy. Acting on a complaint from Socialist deputies, prosecutors began an investigation to learn if Mr. Tapie might have received special treatment in the case, which Mr. Tapie denied. They are also trying to understand why government officials did not challenge the outcome despite indications of possible anomalies in the procedure.
At the time of the arbitration, Mr. Richard was chief of staff to Ms. Lagarde, who was Mr. Sarkozy's finance minister from 2007 to 2011. French media have reported that investigators are homing in on apparent contradictions in Mr. Richard's explanation of how the procedure was decided.
Late Wednesday, the prosecutors said they had begun a formal investigation of another man in the case, Jean-François Rocchi, who had been responsible for liquidating the assets of Crédit Lyonnais. Mr. Rocchi was taken into custody on Monday for questioning and appeared before the magistrates Wednesday afternoon. He has also denied any wrongdoing in the matter.
Ms. Lagarde has herself come under suspicion for having allowed the arbitration to go forward. She denies wrongdoing, saying she acted in the best interest of French taxpayers to put an end to the dispute. The I.M.F. board has expressed its support for her.
On May 24, prosecutors in a related enquiry made Ms. Lagarde an "assisted witness," a less-serious status than that implied by a formal investigation.
Since then, prosecutors have also put Pierre Estoup, a member of the arbitration panel, under formal investigation. The officials acted after learning that Mr. Estoup had failed to disclose previous relationships with Mr. Tapie and his lawyer at the time of the procedure. Mr. Estoup has denied wrongdoing.
Mr. Richard has been chief executive of France Télécom since 2010, and was given the additional title of chairman in 2011. The French newspaper Le Monde quoted a spokesman for Mr. Richard as saying Wednesday that he was feeling "confident and combative," and had left the hospital.
The possibility that Mr. Richard could face criminal charges creates a tricky situation for the company, in which the state holds 27 percent of the shares. The former state telephone monopoly, which is changing its name to Orange, ranks among the biggest telecommunications providers in Europe, employing more than 170,000 people worldwide.
A spokesman for Prime Minister Jean-Marc Ayrault said the company's board, to which the state appoints three of the 15 directors, would meet in the coming days to discuss the situation.
"Through its board members the state will assert its position as a shareholder," the spokesman said, according to Reuters.
Le Monde this month quoted Arnaud Montebourg, the French industry minister, as saying that Mr. Richard should quit in the event that he was placed under formal investigation. Mr. Montebourg later denied having said that.
France Télécom said in a statement that it "acknowledges the decision to place Stéphane Richard under formal investigation, but wishes to make it clear that this has no consequences on his current responsibilities. Stéphane Richard will return to work tomorrow morning."
Tom Wright, a spokesman for France Télécom, declined to comment further.
Investors appeared to show little concern about the matter, and France Télécom shares closed almost unchanged.
This article originally appeared in The New York Times.