The head of the IMF Dominique Strauss-Kahn has been charged with a criminal sexual act, attempted rape and unlawful imprisonment in an alleged sexual assault of a hotel maid in New York City, police said.
Mr Strauss-Kahn is expected to be brought before a state court judge later today. His attorney, Benjamin Brafman, said he "will plead not guilty."
Mr Strauss-Kahn's wife Anne Sinclair said she had no doubt he would be proved innocent of the sexual assault charges made against him.
"I do not believe for a single second the accusations levelled against my husband," Sinclair said in a statement.
"I do not doubt his innocence will be established. I appeal for restraint and decency," she added.
The IMF said this evening that its No. 2 official, John Lipsky, will step in as acting managing director of the global institution in the absence of Mr Strauss-Kahn.
IMF spokesman William Murray said Mr Lipsky will meet with members of the IMF board to inform them of developments. The board is the main overseer of the IMF's daily operations.
"In line with standard IMF procedures, John Lipsky, first deputy managing director, is acting managing director while the MD is not in DC," Mr Murray said in a statement.
Mr Strauss-Kahn, a key player in the world's response to the 2007-09 financial meltdown and in Europe's ongoing debt crisis, was removed from an Air France plane ten minutes before it was to take off for Paris from John F Kennedy International Airport in New York police spokesman Paul Browne said.
A 32-year-old maid filed a sexual assault complaint after fleeing the $3,000-a-night hotel suite at the Sofitel in Times Square where the alleged incident occurred yesterday afternoon, Browne said.
Mr Strauss-Kahn (62) who has been considered a possible Socialist Party candidate in the French presidential election in April and May 2012, appeared to have fled the hotel after the incident, the police spokesman said.
Mr Browne gave reporters an account of events which led to the state charges against Mr Strauss-Kahn. "She told detectives he came out of the bathroom naked, ran down a hallway to the foyer where she was, pulled her into a bedroom and began to sexually assault her, according to her account."
"She pulled away from him and he dragged her down a hallway into the bathroom where he engaged in a criminal sexual act, according to her account to detectives. He tried to lock her into the hotel room," he added.
Mr Browne said Mr Strauss-Kahn does not have diplomatic immunity.
The news rocked France, where latest opinion polls ranked Mr Strauss-Kahn, the front-runner for the presidential election next April and May. Marine Le Pen, head of the far-right National Front, said her rival's hopes were crushed.
Renaud Muselier, a member of conservative President Nicolas Sarkozy's UMP party, said: "It's a disaster for our country and France's image because he is the head of the IMF and it completely changes the cards for the presidential election."
The allegation will be a major worldwide embarrassment to the IMF, which has authorized billions of dollars in lending programs to troubled countries and has played a major role in the euro zone debt crisis.
It follows the announcement on Thursday that John Lipsky plans to step down in August when his term ends.
The IMF managing director has yet to say whether he will run for president, although French opinion polls put him as a clear winner over conservative incumbent Nicolas Sarkozy if the two faced off in an election.
"The NYPD realised he had fled, he had left his cell phone behind," Mr Browne said. "We learned he was on an Air France plane. They held the plane and he was taken off and is now being held in police custody for questioning."
He was taken to the police department's Special Victims office in Manhattan.
The woman, who has not been named, "was brought by EMS (emergency medical services) to the Roosevelt Hospital, where she was treated for minor injuries," Mr Browne said.
Mr Strauss-Kahn was on his way to Europe for a meeting today with German Chancellor Angela Merkel to discuss the European debt crisis and then was to attend a euro zone finance ministers meeting in Brussels tomorrow.
Mr Strauss-Kahn took over the International Monetary Fund in November 2007 for a five-year term scheduled to end next year.
Before that, he was a French finance minister, member of the French National Assembly and a professor of economics at the Institut d'Etudes Politiques de Paris.
The IMF declined to comment and IMF board officials told Reuters they had not been informed officially of the incident.
Mr Strauss-Kahn has faced controversy before. In October 2008, he apologized for "an error of judgment" for an affair with a female IMF economist who was his subordinate. An inquiry cleared him of harassment and abuse of power, although he was warned by the fund's board of member countries against further improper conduct.
He apologised to the woman, Piroska Nagy, and his wife, French television personality Anne Sinclair, as well as to IMF employees for the trouble he had caused.
Since taking over the IMF, he has won plaudits for putting the fund, the world's main overseer of the global economic system, at the center of global efforts to cope with the financial meltdown of 2007-09.
Mr Strauss-Kahn introduced sweeping changes at the global institution to ensure that countries swamped by the financial collapse had access to emergency loans. He was pivotal in brokering a bailout program for Iceland, Hungary, Greece, Ireland, and recently Portugal.
He has also overseen internal changes that have given emerging market countries, such as China, India and Brazil, greater voting power in the institution, and weighed into thornier issues by urging China to allow its currency to rise in value in a dispute with the United States.
Based in Washington at the IMF's headquarters, Mr Strauss-Kahn has continued to spend a lot of time in France, fanning speculation he was considering re-entering politics as a presidential candidate.
Mr Lipsky's planned departure and now Mr Strauss-Kahn's detention raises questions about a possible leadership vacuum should the IMF chief be charged by US authorities or face possible discipline by the IMF board.
Reuters