French Aurora to pay EUR 62m in US fraud case

13th February 2005, Comments 0 comments

LOS ANGELES, Feb 12 (AFP) - French insurer Aurora, one of the parties targeted by a multi-billion-dollar lawsuit that goes to trial in California next week, has agreed to an USD 80 million (EUR 62 million) settlement in the case, a US source told AFP on Saturday.

LOS ANGELES, Feb 12 (AFP) - French insurer Aurora, one of the parties targeted by a multi-billion-dollar lawsuit that goes to trial in California next week, has agreed to an USD 80 million (EUR 62 million) settlement in the case, a US source told AFP on Saturday.

The deal, brokered Friday between the California Department of Insurance and the French firm, marks the first significant settlement in the seven-year-old civil case over the allegedly fraudulent 1991 acquisition of failed US insurance firm Executive Life by French bank Credit Lyonnais.

"They (Aurora) have settled yesterday (Friday)," the source close to the California Insurance Department told AFP on condition of anonymity, adding that the memorandum of understanding has yet to be approved by Aurora's board of directors.

Aurora is a rebaptised version of Executive Life. It was renamed after its 1995 repurchase by Artemis, another firm targeted by the lawsuit and the holding company of French tycoon Francois Pinault.

The deal with Aurora was reached just days ahead of a massive and diplomatically-thorny civil trial in the affair that is due to kick off in Los Angeles on Wednesday with the start of jury selection.

California Insurance Commissioner John Garamendi is seeking USD 2.5 billion (EUR 1.9 billion) allegedly made by the French parties in the transaction, plus interest, with the total amount sought reaching USD 3.7 billion (EUR 2.8 billion).

The settlement with Aurora will allow the firm to escape the trial, in which Garamendi alleges that 330,000 Executive Life policy holders in the United States suffered financial losses.

But the other French parties, including Artemis, Credit Lyonnais, the CDR, a French government structure set up to manage the assets of the formerly state-owned bank, and French insurer MAAF will still face trial, barring any last minute-agreements.

Both the American and the French sides in the case however said this week that there was very little chance of a last-minute deal that would avert the start of the risky trial, the outcome of which is uncertain.

The trial stems from the indirect purchase more than a decade ago of Executive Life by Credit Lyonnais.

At the time, banks were barred from owning more than 25 percent of insurance companies and it was also illegal for entities controlled by foreign governments to own a California insurer.

The then state-owned Credit Lyonnais is accused of using MAAF as a front company to acquire the failed firm and its lucrative portfolio of junk bonds, later sold on to Artemis, which the US side said made USD 2.5 billion (EUR 1.9 billion) profit from the murky transaction.

Criminal charges linked to the operations were settled in December 2003 when French parties to the deal agreed to pay a total of 771 million (EUR 599 million).

With the civil case threatening to be even more expensive if the French side loses, the case has turned into a symbol of tattered Franco-American relations, already strained by differences over the war in Iraq.

© AFP

Subject: French News

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