Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), has been cleared of harassment, favoritism and abuse of power, in connection with his relationship with a female subordinate, an IMF economist.

According to a fund director, who spoke earlier on condition of anonymity, the investigation focused on Strauss-Kahn’s brief, consensual affair in January 2008, with Piroska Nagy, wife of former Argentine central bank, President Mario Blejer.

The inquiry began after a complaint by a third person.

Nagy’s lawyer, Robert Litt, said that Nagy, who worked in the IMF’s Africa department, left the agency in August. He said on that Nagy had not alleged any misconduct by Strauss- Kahn, and that she resigned voluntarily in response to a severance offer available to all staff.

The IMF report also said Strauss-Kahn “played no role in her subsequent employment” at the European Bank for Reconstruction and Development in London.

Expressing his regret about the entire episode, Strauss-Kahn repeated an earlier apology to his staff and his family. He said: “I very much regret the incident and I accept responsibility for it.”

The 59-year-old former French finance minister, who took the helm of the agency in November 2007, said he accepted the board’s findings. His wife, French television personality Anne Sinclair, dismissed it as a “one night stand” in a statement on her blog.

Although the investigation by the fund’s board cleared Strauss-Kahn of any wrongdoing, a statement by the Washington-based agency said: “Nevertheless, the Executive Board noted that the incident was regrettable and reflected a serious error of judgment on the part of the managing director.”