Appeals Court Throws out $241 Million Award in Executive Life Suit

September 22, 2008

An appeals court tossed out a $241 million award won by California in a lawsuit over the takeover of failed insurer Executive Life by French investors.

The 9th U.S. Circuit Court of Appeals overturned the award by a lower court and ordered a new trial to recalculate the damages that Artemis SA, an investor, should pay the state.

The case stems from California’s 1991 takeover of Executive Life Insurance Co. after it failed. The next year, the state insurance commissioner sold the company’s junk bond portfolio for $3.25 billion to an investor group that included the French bank Credit Lyonnais, which is controlled by the French government. Because California law at the time banned foreign governments from owning insurance companies, Credit Lyonnais officials gave assurances that private investors would control the new company.

In 1999, the state Department of Insurance sued the French investors after officials say they uncovered a conspiracy to conceal the French government’s control of the new company. Most of the investors, including Credit Lyonnais, settled the legal dispute for close to $700 million in 2005.

Artemis and investor Francois Pinault, however, took the case to trial. A jury ruled against Artemis but exonerated Pinault. The ruling by the appeals court came in the judgment against Artemis.

Former Credit Lyonnais Chairman Jean Peyrelevade also pleaded guilty in federal court in 2006. He was sentenced and fined $500,000.

Two remaining investors went to trial and a jury exonerated Francois Pinault but said Artemis S.A. should pay the state $700 million in punitive damages. A trial judge tossed out that award and ordered Artemis to pay $241 million, which the appeals court said should be reconsidered.

Topics Lawsuits California

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