US judge breathes life into Executive Life trial

23rd November 2004, Comments 0 comments

LOS ANGELES, Nov 22 (AFP) - A US judge on Monday refused to toss out a multi-billion-dollar civil lawsuit brought against French parties implicated in the allegedly fraudulent 1990s purchase of US insurer Executive Life.

LOS ANGELES, Nov 22 (AFP) - A US judge on Monday refused to toss out a multi-billion-dollar civil lawsuit brought against French parties implicated in the allegedly fraudulent 1990s purchase of US insurer Executive Life.

US federal Judge Howard Matz denied the requests for a summary judgement that would have avoided a complex, messy and extremely risky jury trial, but urged both the US and French sides to settle the case before the scheduled February 15 trial date.

Matz told lawyers at a hearing in Los Angeles to "get ready for trial ... but also get ready to renew possible efforts to settle these cases."

He warned that even after what promises to be a lengthy trial, the civil case - which follows a settlement of an acrimonious criminal case last year - will likely be drawn out for a long time on appeal.

"And these policyholders won't be getting their money ... while all this drags out," Matz said of the case that could cost the French parties, including the French government, billions of dollars.

The judge's decision not to throw out the case against French bank Credit Lyonnais and other companies involved in the allegedly illegal 1991 acquisition of California-based Executive Life brought the case one step closer to trial.

"Judge Matz denied the defendants' motions for summary judgment, which were their last chance to avoid facing a jury trial in federal court in LA," a source close to the case who requested anonymity told AFP.

"The motions, if granted, would have gotten them out of the case completely and other motions that would have limited the damages the commissioner could recover," he said.

The case stems from the acquisition by Credit Lyonnais of the collapsed insurance firm and follows the settlement of criminal charges against the French parties 11 months ago.

In the civil phase of the case, the US parties, led by California's insurance commissioner, are demanding damages of USD 2 billion (EUR 1.6 billion) allegedly made by the French parties in the transaction.

The insurance commissioner claims that the then-state-owned Credit Lyonnais illegally bought and then transferred ownership of Executive Life's assets in the form of lucrative junk bonds, and then proceeded to cover up the operation.

But Credit Lyonnais wanted the case to be dropped because California received full market value for Executive Life's insurance business and "junk bond" portfolio when it was sold.

"Judge Matz said that he agrees with the commissioner that the law does not permit the defendants to keep profits earned through fraud, even though they paid fair value for the assets of Executive Life," the source close to the US parties in the case said.

The French parties include Credit Lyonnais, Artemis, its owner, tycoon Francois Pinault, and the CDR, the French government body that now manages the assets of the formerly state-owned Credit Lyonnais, and French insurer Maaf.

The civil jury trial will now go ahead in Los Angeles unless a last-ditch settlement can be brokered between the French and US parties before February 15.

"I can't predict what will happen but it is usual in cases such as this for settlement discussions to happen after the summary judgement motions are decided and before trial," the source close to the US parties said.

The last round of settlement talks, the second in the civil phase of the case, took place in Los Angeles in August but ended without agreement. No further talks have so far been scheduled, sources said.

But former Executive Life policyholders who have banded together to form a group called the Executive Life Action Network claim they are due more than USD 4 billion in damages for the losses they suffered.

They adamantly oppose a settlement in the case that they say could cost them billions of dollars.

Civil proceedings were launched in 1998 on behalf of 330,000 Executive Life policy holders who Insurance Commissioner John Garamendi said were harmed by illegal acquisition of the firm.

French officials and US prosecutors struck a plea deal in December 2003 to settle criminal charges in the case under which the French parties agreed to pay a total of USD 771.75 million as part of one of the biggest criminal settlements in US history.


Subject: French News

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