France agrees US deal on Executive Life

16th December 2003, Comments 0 comments

PARIS, Dec 15 (AFP) - The main parties in a long-simmering row over the contested purchase of a US insurer by a French bank have reached a final agreement to settle the dispute, the French finance ministry announced late Monday.

PARIS, Dec 15 (AFP) - The main parties in a long-simmering row over the contested purchase of a US insurer by a French bank have reached a final agreement to settle the dispute, the French finance ministry announced late Monday.

Under the deal, the French parties would pay USD 770 million (EUR 626 million) to end the dispute over the purchase of failed California insurance company Executive Life by Credit Lyonnais bank a decade ago, a transaction that US authorities say was illegal.

"The documents making up this agreement will be ratified by the judge in the coming weeks," the finance ministry said in a statement.

"It's a complete agreement including all the corporate bodies," one of the signatories later said on condition of anonymity.

These include Credit Lyonnais, CDR, a public company that controls the bank's assets, Artemis, a holding company which eventually acquired Executive Life, and Maaf, a French insurer also involved in the case.

But former Credit Lyonnais chief Jean Peyrelevade and his right-hand man Dominique Bazy are not included in the deal. They stand accused in California of having known of the illegality of the operation, a charge they deny.

"Discussions are continuing between California prosecutors and the individuals not included" in the agreement, the ministry said.

Legal action, begun five years ago, arose from the 1993 takeover of Executive Life by Credit Lyonnais, then state-owned, through front companies.

At the time, banks and foreign governments were barred by law in the United States from owning more than 25 percent of insurers.

The out-of-court settlement allows France, which had already backed away from two earlier proposed settlements, to avoid a legal battle in criminal court that could have further tested French-US relations already strained over Paris's objection to the US-led war in Iraq.

But the settlement comes at a hefty cost.

The deal, a draft of which was agreed last week, calls for the French state to shell out USD 475 million out of the USD 770 million fine, with private French parties paying the rest.

French Prime Minister Jean-Pierre Raffarin justified the government's decision to sign the agreement in an interview to appear in Tuesday's Parisien-Aujourd'hui.

"From the moment when all the corporate bodies concerned had considered the agreement, the choice was simple: either pay the USD 475 million, or go to court in a case that could lead us to paying out at least four billion, or ten times as much," Raffarin said.

"To that would be added a very great risk: that Credit Agricole/Credit Lyonnais lose its American licence, which would have been a killer for the business. All in all, this affair has been very painful," he said.

The latest settlement would spare French parties from facing a criminal case. A civil trial is set to open in 2005 that could potentially cost several billion more.

More than 330,000 Executive Life policyholders are seeking USD 2.5 billion that Credit Lyonnais and Artemis were believed to have made in profit on the insurer's assets, according to lawyers for the policyholders.

 © AFP

                                                                Subject: France news

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