If the reports in an article in the French daily Le Monde are correct, the U.S. Attorney’s Office, Bank Regulators and representatives from the French Bank Credit Lyonnais (CL) are near to reaching a deal over the claims against the bank concerning the take over of California’s Executive Life in 1992.
Le Monde reported that high level meetings had been held in Washington on Monday, and that a basic framework had been agreed upon. Many details, however, remain to be worked out, including how much CL will offer in compensation to policyholders of Executive, now operating as Aurora National Life Assurance in Santa Monica. The amount has been estimated at between $50 and $100 million.
The complex case, which is the subject of several civil suits, including one filed by ex-Insurance Commissioner Chuck Quackenbush and one more recently by Attorney General Bill Lockyer, arose from the questionable relationship between CL, a company called Altus Finance, which eventually purchased Executive’s assets, including a junk bond portfolio that turned out to be worth several billion dollars, after the company had been put into administration by the Insurance Department, and one of France’s most successful businessmen, François Pinault.
The complaints charge that Altus was not controlled by individual investors, but by CL, whose majority shareholder at the time was the French government. If true, CL would have been in violation of the Glass-Steagle Act, then in force, which prohibited banks from participating in the management of insurance companies. It would also contravene California statutes, which prohibit foreign governments from investing in domestic insurers. The later charges against Pinault and his companies accused them of knowing the real situation, and failing to disclose it, and as acting as behind the scenes participants in the deal.
The U.S. Attorney’s Office in LA
has been pressing Washington to allow it to bring an indictment for some time. Last week two prominent California legislators, Howard Berman and Nancy Pelosi, publicly urged Attorney General John Ashcroft to go ahead with an indictment.
Any potential settlement would have to take into account the demands of the policyholders, many of whom had annuity payments cut following the takeover by Altus, and the several civil suits now in the California Courts. It would also have to resolve an ongoing investigation of CL by the Federal Reserve. The French government, however, which denationalized CL several years ago, has been pressing hard for an end to the investigations, and CL’s Washington lawyer, George Terwillinger, a former deputy attorney general, who represented president Bush during the recounting of votes in Florida, has argued that CL did no intentional harm, and should be allowed to settle the case.
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