Franco-U.S. Clash Heats Up over Executive Life

December 4, 2003

The failure to reach a settlement agreement over the pending criminal charges in the Executive Life affair has already increased tensions between France and the U.S. as politicians and commentators from both countries defend their respective positions.

In France several government officials, including the Prime Minister Jean-Pierre Raffarin, the Foreign Minister Dominique de Villepin and the Finance Minister François Mer, have signaled that they see a trial as pracically inevitable,and have strongly supported the French position. Federal prosecutors have expressed similar confidence in their case.

Despite offering a total of $585 million, $385 million of which would have gone into a fund to pay policyholders of the collapsed California life insurers taken over by Altus Finance in 1991, no deal was reached. The failure is generally attributed to the reluctance of the U.S. Attorney’s office in LA to agree to drop charges against French businessman François Pinault and ex-Credit Lyonnais head Jean Peyrelevade.

No more settlement talks are scheduled, and the AG’s office is expected to unseal the criminal indictments soon. According to unofficial reports, Pinault, and his holding company, Artemis S.A. will be described as the behind the scenes orchestrators of the bank’s takeover of Executive Life by acting as a go-between for the deal. After it was completed, Artemis bought the junk bond portfolio Altus had acquired, and subsequently made several billion when the securities rose in value. It also currently owns 67 percent of Aurora Life, Executive’s successor.

If no settlement is reached, and right now that doesn’t appear likely, a trial would eventually take place. Those found guilty of criminal activities would then face a series of civil suits by the Calif. Insurance Commissioner’s office and others seeking to recover several bullion dollars they claim are owed to Executive’s policyholders.

Reliable sources have indicated that Pinault had pushed for a global settlement of all charges, both criminal and civil, as he and his company would most likely be the “deep pocket” from which the civil recoveries would be sought. When this was refused he apparently refused to be a part of any settlement. His influence with the French government apparently pushed it to make the decision to reject the deal as well.

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