A member of Credit Lyonnais’ executive committee and the Chairman of the Credit Lyonnais subsidiary Altus Finance in the mid-1990s has agreed to plead guilty to a felony charge of causing Credit Lyonnais to make false statements to the Federal Reserve Bank.
Dominique Bazy, 52, of Paris, has agreed to plead guilty to the federal charge. In a plea agreement filed today in United States District Court in Los Angeles, Bazy agreed to pay a $250,000 criminal fine and to be banished from the United States for a period of three years.
Bazy is scheduled to appear before United States District Judge Dickran Tevrizian on the afternoon of Monday, February 9.
The Federal Reserve today announced that it had resolved a parallel regulatory action against Bazy.
The charges against Bazy 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 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, a federal grand jury in Los Angeles indicted six French nationals, including two former chairmen of Credit Lyonnais, on various fraud and other charges for their role in a conspiracy to illegally acquire the assets of the bankrupt Executive Life.
Earlier this month, four other defendants pleaded guilty to multiple felony charges. They are: Credit Lyonnais; CDR-Entreprises S.A., as the successor in interest to Altus; MAAF Assurances S.A. (MAAF), a major French mutual insurance company; and Jean-Claude Seys, the Chairman of MAAF. As a part of these earlier agreements, these defendants, along with Artemis S.A., a holding company controlled by French businessman Francois Pinault, will pay a total of $770.5 million in fines, penalties and restitution-type payments to establish victim compensation funds. (See: http://www.usdoj.gov/usao/cac/pr2004/005.html)
The criminal information filed yesterday in connection with Bazy’s plea agreement includes allegations that Bazy caused Credit Lyonnais to conceal from the Federal Reserve material facts relating to Credit Lyonnais’ illegal ownership and control of Aurora.
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.