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• •
106 Executive Life Fraud Trial
Verdict Says
French billionaire Francois Pinault did not defraud
California Insurance Regulators - Mixed Verdict in Exec Life
Fraud Trial
• • May
11, 2005 / A jury reached a split decision Tuesday in the
long-running legal battle over the collapse of Executive
Life Insurance Co., finding that a company controlled by
French billionaire Francois Pinault defrauded California
regulators in a scheme to acquire the failed insurer's
assets, but clearing Pinault himself of wrongdoing.
• • The decision, which came after an
eight-week trial and more than 12 full days of deliberation,
left open the question of whether damages would be assessed
against Pinault's firm, Artemis. The state had been seeking
damages of $1 billion.
• • U.S. District Judge A. Howard Matz
postponed a hearing on the issue until the last week of May
at the earliest and urged both sides to
settle.
• • "It's time to stop the posturing," Matz
told attorneys on both sides. "It's time to stop the muscle
flexing. I hope you will resolve your
differences."
• • Los Angeles-based Executive Life was
the largest life insurance company in California when it
collapsed in 1991 because of steep losses in what had been a
$7-billion junk bond portfolio. In an attempt to protect
policyholders, state Insurance Commissioner John Garamendi
took over the company and sold the assets for $3.25 billion
in 1992 to an investor group financed by French banking
giant Credit Lyonnais. The investors later sold the assets
for a big profit.
• • The state Department of Insurance filed
suit in 1999, alleging that Credit Lyonnais, owned at the
time by the French government, used a series of front
companies to acquire the junk bond portfolio and the
insurance assets of Executive Life, in violation of a state
law that prohibits foreign government entities from owning
insurance firms in California.
• • Specifically, the state's suit alleges
that Artemis was created in part by Pinault in 1992 in a
scheme to help Credit Lyonnais unload the assets after U.S.
officials began asking questions. Pinault, one of the
richest people in France, controls a financial empire that
includes fashion brands Gucci and Yves Saint Laurent and
Christie's auction house.
• • In its verdict, the jury cleared
Pinault of civil charges that he engaged in intentional
misrepresentation, concealment or fraud when he acquired
some of the assets of Executive
Life.
• • However, the jury found that Artemis
was liable for conspiracy and fraud for its role in the
deal.
• • The jury deadlocked on the question of
whether state regulators, had they known of the scheme,
would have sold the assets to another party.
• • Reflecting the hybrid nature of the
jury's decision, both sides claimed victory.
///
ByLines:
Editors Note
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