French tycoon questioned in Executive Life case

25th October 2004, Comments 0 comments

PARIS, Oct 22 (AFP) - French business tycoon Francois Pinault, targeted in complex legal action over the collapse of California insurance company Executive Life, was questioned here on Friday by a US lawyer under the supervision of a French judge.

PARIS, Oct 22 (AFP) - French business tycoon Francois Pinault, targeted in complex legal action over the collapse of California insurance company Executive Life, was questioned here on Friday by a US lawyer under the supervision of a French judge.

The US claimants are demanding damages of USD 2.0 billion (EUR 1.6 billion).

The case is the sequel to long negotiations last year to settle criminal proceedings that were an additional snag in already strained relations between France and the United States.

The affair attracted particular attention in France because Pinault is a high-profile, rich and well-connected financier. The collapse of Executive Life, and the subsequent profits made from its assets, have left deep scars in California where many people lost heavily.

The lawyer, Gary Fontana, who questioned Pinault here was preparing for a civil action due to begin in Los Angeles, California, on February 15, unless the US and French parties to the dispute reach a last-minute amicable arrangement.

Fontana works for the California state insurance commissioners. Many people had bought policies from Executive Life and consider that profits subsequently made by the French parties were improper gains at their expense.

The plaintiffs allege that Credit Lyonnais, state owned at the time but now owned by French bank Credit Agricole, arranged illegally in the early 1990s for the purchase and transfer of assets in the form of bonds owned by Executive Life. The sale was handled by California authorities who were in charge of the company because it had gone bankrupt.

Credit Lyonnais, having bought the portfolio of so-called "junk" or high-risk bonds in 1991, sold them on in 1992 to Pinault through his holding company Artemis, which subsequently acquired Executive Life itself.

At the time it was illegal for a bank to own more than 25 percent of an insurance company. French insurance company Maaf was involved as an intermediary.

But US authorities had not noticed the composition of ownership behind the deals until they received an anonymous tip years later. The French parties to the dispute argue that they acted in good faith.

The bonds surged in value and are widely believed to have boosted substantially the wealth of Pinault who controls the Pinault-Printemps-Redoute retail and luxury goods group.

Under US procedures, lawyers for the two sides prepare their own enquiries to prepare for a civil case.

Employees of the French bank Credit Lyonnais and of French insurance company Maaf have already been questioned in France, and staff of the California inusrance commissioners have been questioned in the US under the preparatory proceedings, Fontana's French colleague for the commissioners, lawyer Alexander Blumrosen told AFP.

He recalled that attempts at mediation between the two sides had failed earlier this year.

To settle criminal proceedings, the French state, acting as owner of Credit Lyonnais at the time, reached an amicable agreement in December, paying USD 475 million. Of this, USD 375 million was in the form of a provision against the outcome of the civil case, and half of the amount could be repaid.

Pinault also paid USD 185 million, of which 75 million was a provision, two-third of which might be repaid. Credit Lyonnais paid USD 100 million and Maaf USD 10 million.

In June this year, French businessman Francois Marland said that he was the informant who tipped off the US officials. "I couldn't imagine in 1998 that this case would reach such amplitude," he said then.

© AFP

Subject: French News

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