THE French Government was last night close to an agreement with Californian regulators worth a reported $525 million (£277 million) over a deal in which Crédit Lyonnais bought Executive Life for a fraction of its value 13 years ago.
Gary Fontana, lawyer for the California Department of Insurance, said that discussions were “going well” and the sides were “close to a final deal”.
The struggling insurer and its depressed portfolio of junk bonds rebounded in value after the sale to Lyonnais.
The lawsuit alleges that the sale tricked Executive Life and its 350,000 policyholders out of $2 billion in profit made by the French.
John Garamendi, who, as California’s Insurance Commissioner, was responsible for selling Executive Life in 1991, now claims he was duped. He says he was told that Credit Lyonnais and MAAF Vie, a small French insurer, would rehabilitate Executive and that policyholders’ investments were “secure”. Those that held annuities, life insurance and pension funds with Executive Life, however, say they lost $4 billion.
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The insurance commissioner is now pursuing a lawsuit filed by Chuck Quackenbush, his predecessor, that accuses the French companies, the French Government, which owned Lyonnais at the time, of fraud.
A civil case will begin today in a federal courtroom in Los Angeles if both sides do not hammer out a final settlement.