French Government Obtains One Month Delay in ELIC Case

October 27, 2003

If anyone still harbored any doubts that the U.S. Attorney’s case against Credit Lyonnais (CL) and others involved in the takeover of Executive Life Insurance Corp. (ELIC) is highly politicized, they were dispelled on Friday. U.S. Attorney General John Ashcroft has reportedly instructed the L.A. office to grant an additional delay until November 24 to give the two sides additional time to reach an agreement on settling the case.

The reports first appeared in a news bulletin from Agence France Presse, and were repeated in many French newspapers, including the financial daily les Echos. They indicated that Ashcroft had met with his opposite number Dominique Perben, the French Minister of Justice, on Tuesday and discussed the case as well as other matters. They also coincided with a visit to the U.S. by Francis Mer, the French Minister of Finance, who is trying to mend fences between the two countries. He was also scheduled to meet with U.S. Treasury Secretary John Snow, at a finance ministers’ meeting in Mexico City on Sunday.

As yet no comments have come from the U.S., but The AFP report said it had received the information from a “source close to the affair.” It quoted another source as indicating that “as the climate looks better, he [Ashcroft] has apparently asked the assistant federal prosecutor, Jeffery Isaacs to try and reach a ‘global accord.'”

CL had reached a preliminary agreement in September with prosecutors to settle the criminal case that required the French bank Credit Agricole, who now owns CL, to put up $100 million with French insurer MAAF paying $35 million. The Consortium de Réalisation (CDR), a French government agency established to take over CL’s debt mountain in 1995, had reportedly agreed to pay an additional $100 million in fines and to set up a $350 million fund to compensate ELIC policyholders.

The French government, however, rejected the accord on October 15, claiming that it would not sign it, because it did not include a settlement of charges against French nationals. (See IJ Website Oct.16) The refusal supposedly followed a request for extradition, which the French government turned down. That left the AG’s office with little choice but to go forward with the case, as urged by many people involved with it in California, including Congressman Doug Ose. An absolutely final “day of decision” had been set for today.

It now appears, however, that the local office has been told to take the ultimatum off the table, and try to reach an agreement, i.e. it can’t prosecute the case for another month, even if it wanted to.

It’s also unclear what is actually meant by “global accord.” The term is the same in French, and equally imprecise. I could mean only that the AG’s office agree to drop all the criminal charges against all of the corporations and individuals named in the as yet unsealed indictment. It could also mean that negotiations should be opened with civil claimants as well, notably the $10 billion lawsuit being pursued against CL and the other defendants by California Attorney General Bill Lockyer and the lawsuit filed by the Insurance Commissioner’s office.

While Lockyer’s suit has been transferred to the federal courts, and is currently stayed, the CID’s civil action is proceeding with the discovery phase of litigation in L.A. The plaintiff’s attorney’s recently filed a motion asking for a trial date, indicating that they are ready to proceed.

The amounts in question, according to court filings and several reports, are not negligible. Around 42,500 ELIC policyholders are receiving less from Aurora Life, its successor, than they should be getting. This includes over 1600 structured settlement agreements ELIC underwrote, many of which are for for millions of dollars.

With all the politics involved a settlement of the criminal case does appear more likely than before, but whteher it might include the civil claimants is still unclear. However, if a fair settlement can be reached it would certainly benefit, not only CL, but also ELIC’s former policyholders.

Was this article valuable?

Here are more articles you may enjoy.