France Blocks Executive Life Settlement

October 16, 2003

Despite the strong statements from Congressman Doug Ose (See related article in today’s West section), the French government has rejected the settlement agreement in the Executive Life case against Credit Lyonnais (CL) and others, concluded with the U.S. attorney’s office in L.A. in early September.

According to reports from Agence France Presse and the financial journal Les Echos, the government is dissatisfied that French nationals have been excluded from the settlement. The AG’s office is seeking extradition of three former CL executives, as well as Emmanuel Cueff, the general secretary of Artemis, the holding company of French billionaire François Pinault. It also specifically excluded CL’s current CEO Jean Peyrelevade, who has resigned, citing the Executive Life case as the reason. France has rejected the extradition requests (See IJ Web site Oct. 9).

Although the terms of the settlement agreement include provisions that CL would not admit to being at fault, only of failing to fully report the links between it and the other parties, it also imposes heavy financial sanctions. Credit Agricole, which is in the process of acquiring CL, agreed to put up $100 million. French insurer MAAF Assurances has reportedly agreed to pay $35 million. But the Consortium de Réalisation (CDR), a French government agency established to take over CL’s debt mountain in 1995, has reportedly agreed to pay an additional $100 million and to set up a $350 million fund to compensate Executive Life policyholders. Most commentators in France consider the amount excessive, especially as it will ultimately be paid by French taxpayers, and have characterized it as politically motivated.

Whether the French government’s action has effectively ended the settlement, or is merely a prelude to more negotiations is unclear. Ose, whose name appropriately means “dare” in French, wants the case to proceed, and has called on the AG’s office to unseal the indictments handed down by a federal grand jury last August.

Given the French government’s position against extraditing any French citizens named in the indictments, it’s hard to see what the protracted costs of a trial might gain. On the other hand, as CL’s license to continue to do business in the U.S. might ultimately be at stake, one would expect the bank to continue to try and work out a settlement agreement. It would appear to be unable to do so, however, unless the government agrees.

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