Acquitted Pinault wins a draw over Executive Life

11th May 2005, Comments 0 comments

PARIS, May 11 (AFP) - French billionaire Francois Pinault and his holding company Artemis won a draw in a US fraud trial that had strained US-French relations, French legal experts said Wednesday.

PARIS, May 11 (AFP) - French billionaire Francois Pinault and his holding company Artemis won a draw in a US fraud trial that had strained US-French relations, French legal experts said Wednesday.  

The trial was one of the final chapters in a complex saga going back to the early 1990s arising mainly from the bankruptcy of Californian insurer Executive Life, a drama that scarred thousands of US policyholders.  

Pinault, a close friend of French President Jacques Chirac, and Artemis had stood accused of conspiring in a USD 3.7 billion fraud surrounding the takeover of Executive Life by French investors, led by the then state-owned bank Credit Lyonnais.  

In essence, US interests argued that French investors had bought assets illegally, by concealing their true identities.  

The link with Credit Lyonnais has added to interest in the case, since the French bank came close to bankruptcy later in the 1990s, provoking huge controversy in France over mismanagement.  

Added piquancy was leant by the fact that legal action against French interests over their role in buying, and profiting from, Executive Life assets began on a tip off from an insider. And from the fact that one of the central figures, Pinault, is one of the richest men in France.  

In a verdict rendered Tuesday in a Los Angeles federal court, the company Artemis was found guilty of conspiracy in a complicated 1991 takeover of failed Executive Life.  

The French holding company was acquitted of two other charges - concealing information and making false statements - because the nine jurors found errors had been committed but they had not damaged the plaintiffs.  

Pinault, who had defended himself, was cleared of all charges.  

"Francois Pinault and Artemis came out of it well. Thus they justified their position throughout" the trial, said Arnaud Raynouard, a law professor at Toulouse University.  

The verdict is "good news" for the Pinault/Artemis team, but "it isn't very logical", said Christophe Leguevaques, a business lawyer, wondering how Pinault could be acquitted while his holding company was not.  

"How can a party participate in a conspiracy without the intervention of the physical party who is said to have been the agent?" he asked.  

Trial Judge Howard Matz in February approved a settlement in the seven-year-old suit, which released the French state and Credit Lyonnais from the case - at a price of USD 600 million and USD 80 million respectively - leaving Pinault and Artemis to face the potentially costly music alone.  

California's Insurance Commissioner John Garamendi alleged in his suit that Artemis had acquired Executive Life's insurance business and part of its USD 3.25 billion junk bond portfolio as part of a plot to disguise the illegal acquisition of the California firm.  

The suit claimed that Credit Lyonnais used French insurer MAAF as a front to buy Executive Life, violating a Californian law barring foreign governments from controlling insurance companies. In addition, a US federal law banned banks from owning more than 25 percent of a non-banking business.  

The suit claimed the French investors disguised the fact that Credit Lyonnais was behind the deal and that it sold off key parts of Executive Life's assets in 1994 to Artemis as part of a cover-up.  

Garamendi claimed in his suit brought on behalf of about 330,000 former Executive Life policy holders that he never would have sold the firm to the French investors if he had known Credit Lyonnais was behind the operation.  

He also accused Artemis - and Pinault - of making billions of dollars in profit from the allegedly ill-gotten Executive Life junk bonds when their value shot up in the late 1990s.  

Following the verdict Tuesday, it was not immediately determined if there would be a damages phase in the case, which saw jury deliberations run into a fourth week after an eight-week trial.  

"The jury decision leaves a feeling of incompleteness but even so it is a victory of the defence's argument that no one was hurt in the operation," Raynouard said.  

Artemis, however, may be forced to pay damages, to punish the intent, both lawyers said.  

"In the United States, to make false statements is much more serious than in France. It is highly immoral and is often heavily penalized," Raynouard said.


Subject: French News

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