Pinault defends himself in US fraud trial

LOS ANGELES, April 5 (AFP) – French tycoon Francois Pinault, one of the world’s richest men, on Tuesday denied conspiring with French investors to purchase the illegally-acquired assets of a failed Californian insurer.

The testimony of Pinault, the key witness in the marathon case over the 1991 acquisition by a group of French firms of insurance company Executive Life, was described by sources as the trial’s “moment of truth.”

The high-stakes trial in a Los Angeles civil court has involved the highest levels of power in France and has strained ties between Washington and Paris.

The trial shifted up a gear with the testimony of Pinault, who is ranked by Forbes magazine as the world’s 76th richest person with a fortune worth USD 5.9 billion (EUR 4.49 billion).

He chose to defend himself and his holding company Artemis against allegations the firm was complicit in a USD 3.7 billion (EUR 2.88 billion) fraud surrounding the takeover of Executive Life by French investors in 1991.

When asked by attorney Gary Fontana, representing the California Insurance Department, if he had conspired to “deceive and mislead” the department, Pinault answered: “No, never.”

Pinault and his firm are accused of acquiring and profiting from Executive Life’s lucrative – and allegedly ill-gotten – junk-bond portfolio in 1995 after the then state-owned French bank Credit Lyonnais acquired the firm illegally and then sold off its assets.

The suit claims that Credit Lyonnais used French insurer MAAF as a front to buy Executive Life, violating a California law barring foreign governments from controlling insurance companies.

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

Artemis later conspired with the French investors to buy some of the assets of Executive Life, making a USD 2.5 billion (EUR 1.94 billion) profit on the operation when the value of the bonds rose, the suit claims.

California Insurance Commissioner John Garamendi is seeking a total USD 3.7 billion (EUR 2.88 billion) in restitution, which includes more than a decade of interest.

US sources say that jurors, if they find Artemis liable, could also impose up to 10 times that amount in punitive damages.

But Pinault, a close friend of French President Jacques Chirac who controls French department store Printemps and a number of luxury brands, denied any wrongdoing.

He then stressed that Artemis was never involved in the initial purchase of Executive Life, some of the key assets of which Artemis only acquired four years later.

Artemis has stressed that it had nothing to do with either the collapse of Executive Life or any misrepresentations made during the purchase by Credit Lyonnais.

Pinault said he became interested in the junk bonds after realising the US economy was preparing to rebound from a recession, increasing the bonds’ potential value.

“I thought that the majority of them would do well, and some of them would collapse,” he said. “But it’s the great numbers theory, if you like.”

He also told jurors he had never met Garamendi, who initially sold Executive Life to the French investors but claims he would not have done so had he known Credit Lyonnais was behind the deal.

Pinault and Artemis are the only defendants left in the civil suit after the French state negotiated a settlement covering its responsibility and that of the Credit Lyonnais.

Trial Judge Howard Matz in February approved a USD 600 million (EUR 466 million) settlement in the seven-year-old suit, which released the French state and Credit Lyonnais from the case, leaving Pinault and Artemis to face the potentially costly music alone.

Artemis has vowed it will not settle in the case at any price, expressing fury over its abandonment by the French government.

“It is presumptuous to talk about being confident, as it is the jury that will ultimately decide the responsibility or otherwise of Francois Pinault,” said a source close to Artemis.

“But this is at last the moment of truth that we’ve been eagerly waiting to rebut the attacks launched by the prosecution,” the source said on condition of anonymity.

Subject: French News