28 May 2004 – LAWFUEL – $110 million paid by Artemis S.A. in a settlement with the United States Attorney’s Office in connection with the Credit Lyonnais criminal case has been transferred to the California Insurance Commissioner, United States Attorney Debra Yang announced.
The funds are earmarked for distribution to claimants in the rehabilitation
proceeding involving the failed Executive Life Insurance Company of California to
compensate them for their losses.
The transfer, which occurred on May 25, 2004, is the result of a settlement
agreement between Artemis, a holding company controlled by French businessman
Francois Pinault, and the United States Attorney’s Office. Pursuant to that
agreement, Artemis paid $185 million – the $110 million that has been transferred
to the California Insurance Commissioner, and an additional $75 million that is
being held in reserve in a settlement fund pending the outcome of the
Commissioner’s civil lawsuit that was filed on behalf of former Executive Life
policyholders. Artemis also paid $500,000 to compensate the United States
Attorney’s Office for costs incurred during the criminal investigation.
The settlement with Artemis was part of a broader agreement that involved the
French bank Credit Lyonnais S.A.; CDR-Entreprises S.A. (CDR-E), a subsidiary of the
French government entity that acquired the bank’s nonperforming assets in 1995;
MAAF Assurances S.A. (MAAF), a major French mutual insurance company; and
Jean-Claude Seys, the Chairman of MAAF. Pursuant to plea agreements, Credit
Lyonnais, CDR-E, MAAF and Seys in January entered guilty pleas to criminal charges
that they made false statements to, and concealed material facts from, federal
banking regulators in connection with the acquisition of junk bonds and the
insurance business of Executive Life.
Credit Lyonnais, CDR-E, MAAF and Artemis have
paid a cumulative total of $770.5 million in criminal fines, civil penalties and
amounts being held in reserve in a settlement fund pending the outcome of the
Commissioner’s lawsuit. Other individuals associated with MAAF and Artemis have
paid an additional $1.25 million in criminal fines and penalties, bringing the
total settlement amount to $771.75 million – which is believed to be the largest
settlement in a criminal case in United States history.
The guilty pleas and settlement agreements stem from the illegal takeover of
Executive Life, which was once the largest life insurance company in California and
held a multibillion dollar portfolio of “junk bonds.” 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 gain illegal 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 an anonymous whistleblower alerted California authorities of their existence.
In December 2003, a federal grand jury in Los Angeles indicted six French
nationals, including two former chairmen of Credit Lyonnais, on various charges for
their role in a conspiracy to illegally acquire the assets of the bankrupt
Executive Life. The indictment alleges conspiracy to commit mail and wire fraud,
mail fraud, wire fraud, conspiracy to defraud the United States and violate the
Bank Holding Company Act, criminal violation of the Bank Holding Company Act and
making false statements to the Federal Reserve during the course of the criminal
investigation.
In February 2004, Dominique Bazy, 52, of Paris, one of the six charged in the
indictment, pleaded guilty to a felony charge of causing Credit Lyonnais to make
false statements to the Federal Reserve. Bazy paid the maximum possible fine of
$250,000, and he was banished from the United States for a period of three years.
The five other defendants named in the indictment all currently reside in France.
If convicted of the various charges in the indictment, they all face substantial
prison sentences.
This case is the result of a five-year 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.
