Former Credit Lyonnais Chairman Offers Guilty Plea

January 20, 2006

A former chairman and chief executive officer of Credit Lyonnais pleaded guilty Thursday afternoon to two felony charges of causing Credit Lyonnais to make false statements to the Federal Reserve Bank.

Jean Peyrelevade, 66, of Paris, appeared Jan. 19 in United States District Court in Los Angeles and entered guilty pleas to two criminal counts which allege that he caused Credit Lyonnais to make false statements to the Board of Governors of the Federal Reserve System. Immediately following the entry of his guilty pleas, United States District Judge Dickran Tevrizian sentenced Peyrelevade to pay a $500,000 criminal fine, to serve five years of probation and to be banished from the United States for a period of three years.

The Federal Reserve said Thursday it had resolved a parallel regulatory action against Peyrelevade.

The charges against Peyrelevade are part of a larger criminal and regulatory investigation involving the takeover of the Executive Life Insurance Company, which was once the largest life insurance company in California.

In 1991, Executive Life was declared insolvent and was seized by the California Department of Insurance. As part of the rehabilitation of Executive Life, both its insurance business and its junk bond portfolio were put up for sale. Credit Lyonnais, through its investment banking subsidiary Altus Finance S.A., orchestrated a scheme in which it obtained Executive Life’s bond portfolio, and used secret “parking” agreements – referred to in French as portage agreements – to illegally gain control of Aurora National Life Assurance Company, a newly formed California life insurance company that acquired the restructured Executive Life insurance business. These secret portage agreements, and Credit Lyonnais’ resulting illegal control of the insurance business, remained concealed until the fraud came to light in the summer of 1998 when a whistleblower alerted California authorities of their existence.

In December 2003, a federal grand jury in Los Angeles indicted six French nationals, including Peyrelevade, on various criminal charges for their role in a conspiracy to illegally acquire the assets of the bankrupt Executive Life.

In January and February of 2004, five defendants pleaded guilty to multiple felony charges. These defendants – Credit Lyonnais; CDR-Entreprises S.A., as the successor in interest to Altus; MAAF Assurances S.A., a major French mutual insurance company; Jean-Claude Seys, the Chairman of MAAF; and Dominique Bazy, a former member of Credit Lyonnais’ executive committee during Peyrelevade’s tenure at the bank – along with Artemis S.A., a holding company controlled by French businessman Francois Pinault, paid a total of $770.75 million in fines, penalties and restitution-type payments to establish victim compensation funds.

This case is the result of an investigation by the Federal Bureau of Investigation, acting in coordination with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York.

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