Thorny US-French fraud trial set to go

11th February 2005, Comments 0 comments

LOS ANGELES, Feb 10 (AFP) - A diplomatically-thorny civil trial over the alleged illegal acquisition of a US insurer by French bank Credit Lyonnais is set to begin next week, with little chance of a settlement in sight, lawyers said Thursday.

LOS ANGELES, Feb 10 (AFP) - A diplomatically-thorny civil trial over the alleged illegal acquisition of a US insurer by French bank Credit Lyonnais is set to begin next week, with little chance of a settlement in sight, lawyers said Thursday.

The trial of French parties involved in the allegedly fraudulent purchase of the assets of the failed California insurer Executive Life in the early 1990s and an alleged cover-up of the transaction is scheduled to begin Tuesday in Los Angeles.

But despite trial Judge Howard Matz's call for a settlement that would avoid a lengthy and politically-divisive trial, lawyers on both sides said that no negotiations were underway or planned ahead of trial.

"Usually, a settlement is reached in this sort of a case and it could still happen on the courthouse steps," a US lawyer said.

"But in this case, we are so far apart that no one is even trying to bring the two positions closer together."

California's Insurance Commissioner John Garamendi is demanding about USD 2.5 billion (EUR 1.9 million), plus interest that could bring the total to more than USD 3.5 billion (EUR 2.7 billion), from the French parties in the case, including Credit Lyonnais, according to the US side.

But the French side insists they will not stump up any more than they already have under a December 2003 settlement of criminal charges in the affair that collectively cost them more than USD 771 million (EUR 599 million).

At a pre-trial hearing in the case Wednesday, Matz ruled that each have only 100 hours to present their cases when the trial begins.

The trial is scheduled to formally begin Tuesday with the start of the process of selecting 12 jurors to hear the case.

Opening remarks are tentatively scheduled for February 18 or 22, Matz said, and the trial should take around three months. Jurors will first decide if the French parties are liable, and will then assess any damages.

Matz also ruled in a last-minute flurry of motions that lawyers for Garamendi will be able to make reference to some aspects of the wide-ranging criminal settlement in the Executive Life case.

The US side had asked for the criminal plea bargain pact to be brought into evidence before jurors.

But Credit Lyonnais and the CDR, a French government structure set up to manage the assets of the formerly state-owned Credit Lyonnais, had asked Matz to "exclude irrelevant facts derived from plea agreements" from the civil trial.

The judge ruled that the parties must jointly draft a document for jurors telling them of the criminal investigation in the case and that Credit Lyonnais, the CDR and French insurer MAAF pleaded guilty to charges contained in the criminal "information."

But he limited how much the jury could learn about the plea deal, ruling that only certain portions of the agreement would be shown to the panel.

"He put a pretty severe limitations on what can be introduced in evidence," a source close to French parties in the case told AFP.

"But the judge will also .. give an instruction that tells the jury that the California insurance laws and the (US) federal banking laws are different," the source said.

California authorities claim that the then state-owned Credit Lyonnais illegally acquired Executive Life's assets, which included a lucrative portfolio of junk bonds, through a series of companies that acted on its behalf and helped disguised the transaction.

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.

Under the terms of the criminal plea deal, the CDR paid USD 475 million (EUR 369 million), of which USD 375 million (EUR 291 million) was set aside to go towards the resolution of the civil case.

French tycoon Francois Pinault, whose company Artemis ended up with the junk bonds, paid up USD 185 million (EUR 143 million), of which USD 75 million (EUR 58 million) is being held pending a resolution in the civil case, while Credit Lyonnais paid USD 100 million (EUR 77 million) and MAAF USD 10 million (EUR 7.7 million).

The civil proceedings were launched in 1998 on behalf of 330,000 Executive Life policy holders who claim they were harmed by the acquisition.

The trial, in which French taxpayers could end up having to stump up billions of dollars in damages, pits California authorities against the French state during an already-rocky period in Franco-US ties amid lingering differences over the war in Iraq.


Subject: French News

0 Comments To This Article