Executive Life Defendants Officially Enter Guilty Pleas
French bank Credit Lyonnais (CL), the Consortium de Réalisation (CDR), a French government agency established to take over the bank’s debt mountain in 1995, and other defendants officially plead guilty yesterday in federal court in Los Angeles to charges stemming from the 1991 takeover of Executive Life.
The official plea confirms an earlier settlement agreement with federal prosecutors, which provided that the accused entities would pay fines and make contributions to trust accounts for the benefit of civil claimants in the amount of $770 million. CL, or rather its new owner Credit Agricole, will pay $200 million and has been placed on probation for three years. The CDR will contribute $375 million to the escrow fund.
The remaining amounts will be paid by Artemis S.A., the holding company of French billionaire businessman François Pinault and $10 million by French insurer MAAF. Charges are still pending against several individual defendants.
The indictments were finally handed down against the defendants in August, following a lengthy grand jury investigation and much political maneuvering. They were never unsealed, but essentially charged the CL and various other companies and individuals participated in a scheme to take over Executive Life, which was prohibited at the time under federal and state laws.
The complex affair began when Altus Finance, then purportedly owned by a group of French and Swiss investors, agreed to purchase Executive’s assets for $3.25 billion. At the time it was the largest California-based life insurer with 340,000 policyholders and $10.1 billion in assets, but it had become so indebted that the California Insurance Department sought someone to bail it out. The meltdown in “junk bond” values following the sharp fall in the stock market in October 1987 had cut the value of its investment portfolio in half. The CID, headed by then newly appointed Insurance Commissioner John Garamendi, sought a solution that would protect policyholders and minimize losses.
Those policyholders now charge that the takeover significantly discounted the true value of the assets, and are seeking to recover around $3 million in damages. The civil actions are not affected by the guilty pleas in the criminal case, and are expected to go to trial later this year.