According to a report in The Wall Street Journal, the U.S. Attorney’s office in Los Angeles plans to bring indictments against French bank Credit Lyonnais and its subsidiary, Le Consortium de Réalisation (CDR), over the bank’s buyout of Executive Life in 1992.
The complicated transaction, which is also the subject of several civil actions, saw Altus Finance, then a Credit Lyonnais subsidiary take over Executive’s junk bond portfolio, and a European group establish Aurora National Life Insurance to take over Executive’s policies. Both groups were subsequently acquired by Artemis S.A., a holding company controlled by French financier François Pinault, who’s also been named as a defendant in the civil suits.
The U.S. Attorney’s office has apparently determined, although it refused to comment on the report, that there’s enough evidence to warrant a criminal indictment against Credit Lyonnais for violations of the Glass-Steagle Act, which at the time prohibited banks from owning insurers.
Credit Lyonnais and its subsidiary could still be indicted, even though the Act’s provisions have been repealed, if there’s sufficient evidence to show that the purchase of Executive Life was in fact under their control, rather than an independent transaction.
The subsequent dealings between the parties, especially Mr. Pinault’s acquisition of Aurora and the junk bond portfolio, which has risen considerably in value, at least raised sufficient questions to require an investigation.
The actual filing of charges may be further delayed, however, as the French Government now owns CDR, as well as the remaining 10 percent of Credit Lyonnais which hasn’t been privatized under a restructuring plan. Any further moves by the U.S. Attorney’s office would probably require backing from the Attorney General’s office in Washington.
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