US jury orders French firm to pay USD 700m

22nd July 2005, Comments 0 comments

LOS ANGELES, July 21 (AFP) - A US jury Thursday ordered Artemis, the holding company of French tycoon Francois Pinault, to pay USD 700 million in punitive damages for profiting from the fraudulent acquisition of a US insurer.

LOS ANGELES, July 21 (AFP) - A US jury Thursday ordered Artemis, the holding company of French tycoon Francois Pinault, to pay USD 700 million in punitive damages for profiting from the fraudulent acquisition of a US insurer.

The jury imposed the hefty penalty two months after ruling in a civil trial that the firm had conspired with French bank Credit Lyonnais and other investors to hide the bank's illegal role in the 1991 purchase of failed California life insurer Executive Life.

But Artemis immediately countered that the award would not stand, saying the jury had made a key legal error in reaching its decision by imposing punitive damages without ordering compensatory damages.

California Insurance Commissioner John Garamendi, who brought the suit in which he had sought USD 3.7 billion in restitution and damages, said he was thrilled with the award and insisted it be upheld.

"We are very, very pleased with what has happened," Garamendi said in a telephone conference.

"The jury today found clear and convincing evidence that Artemis SA was guilty of fraud, oppression or malice against the Executive Life estate and they deserve to be punished.

"We have said all along that wrongdoers should not profit from fraud and the jury agreed with us," said the commissioner who brought the suit on behalf of around 330,000 Executive Life policy holders.

The same Los Angeles jury in May sided with Garamendi and found that Artemis had conspired with Credit Lyonnais and other investors to allow the bank to illegally buy the failed insurance company.

But Artemis officials said Thursday they were confident the award would be reduced to zero by Judge Howard Matz because jurors did not award compensatory damages, only punitive damages, which is contrary to what courts allow.

Punitive damages cannot be more than 10 times the amount of compensatory damages and the panel did not award any compensatory damages to Garamendi, they said.

"You can't award punitive damages when there are no compensatory damages," said one of Pinault's lawyers, James Clark. "We're positive on that. The judge will just have to disregard that."

But Insurance Department lawyer Gary Cohen said California law and precedent was clear that no-one is allowed to profit from illegal deeds.

"It is clear that punitive damages may be based on the old-fashioned principle that a defendant cannot benefit from ill-gotten gains and that was also the instruction given by the judge to the jury," he told journalists.

Judge Matz, who presided over the messy and complex trial that began five months ago, has yet to make a ruling on whether the jury's award will stand and it was unclear when he would do so.

Garamendi claimed in his suit that the then state-owned Credit Lyonnais used French insurer MAAF as a front to buy Executive Life, violating a California law barring foreign governments from controlling insurance firms.

In addition, a US federal law banned banks from owning more than 25 percent of a non-banking business.

Artemis was in turn accused of acquiring and profiting to the tune of USD 2.5 billion from Executive Life's lucrative -- and allegedly ill-gotten -- junk-bond portfolio in 1995 after the Credit Lyonnais sold off the US insurer.

But Credit Lyonnais and the French state settled the case on the eve of the start of the trial in February for USD 600 million.

But Artemis and Pinault refused to strike a deal, maintaining they were never involved in the Executive Life purchase so could not be held responsible for it.

They also claimed Garamendi knew all along that Credit Lyonnais was involved in the transaction.

The jury in May found that Artemis -- but not Pinault -- had conspired to profit from the illegal deal, leaving the trial to head to the penalty phase.

Garamendi said the twin verdicts -- liability and penalty -- showed jurors believed his version of the story and also hailed the fact that Executive Life policy holders had clawed back a total of USD 1.3 billion in settlements and awards from the French parties to the Executive Life deal.

The jury award should have marked the finale of the civil trial as well as the closing phases of the decade-old dispute over the Executive Life acquisition that has strained Franco-American ties.

But the row is far from over as the fate of the damage award hangs in the balance and with the possibility of an appeal of the jury's twin verdicts against Artemis.

Copyright AFP

Subject: French news

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