Posted on 12/11/2003 3:43:19 PM PST by Shermy
PARIS (AFP) - France has struck a draft deal with US authorities under which French parties would pay 770 million dollars to settle a long-simmering row over the contested purchase of a US insurer by a French bank.
Finance Minister Francis Mer said Thursday an out-of-court settlement was in sight covering the purchase of failed California insurance company Executive Life by Credit Lyonnais bank a decade ago, a transaction that US authorities say was illegal.
He said on RTL radio that an "agreement in principle" had been reached that should "be finalized by Monday."
US sources close to the matter confirmed that a preliminary settlement "for around three quarters of a billion dollars" had been reached, although official US sources in the Los Angeles office of the US attorney had no comment Thursday.
The signing of a final agreement would allow France, which had already backed away from two earlier proposed settlements, to avoid a legal battle in criminal court that could have further tested French-US relations already strained over Paris's objection to the US-led war in Iraq (news - web sites).
But the settlement comes at a hefty cost.
The agreement calls for the French state to shell out 475 million dollars (390.6 million euros) out of a fine of 770 million dollars, with private French parties paying the rest.
But the final bill could come to more than one billion dollars when taking into account money US authorities are requiring to be put aside pending a civil trial, which itself could potentially cost as much as 2.5 billion dollars.
Legal action, begun five years ago, arose from the 1993 takeover of the failed California insurer by Credit Lyonnais, then state-owned, through front companies.
At the time, banks and foreign governments were barred by law in the United States from owning more than 25 percent of insurers.
After four months of negotiations in Los Angeles and missed deadlines for an agreement, the two sides were "on track" to clinch a deal, Prime Minister Jean-Pierre Raffarin said earlier Thursday.
"They are proposing an agreement which is open to all the companies involved in the matter, which is also open to the individuals," Raffarin said. He did not provide details on the parties.
The settlement "will not cost an additional euro to the state or to France's public finances," he added, in a reference to an initial US proposal rejected by France that had also included a state fine of 475 million dollars.
"I had been firmly opposed to a partial agreement that excluded a certain number of parties, which did not guarantee French interests, the interests of public finances at the level demanded by me and which lacked transparency," he said.
The agreement also includes a settlement of claims against French billionaire Francois Pinault, a close friend of President Jacques Chirac, a source said.
Executive Life was eventually acquired by Artemis, a holding company controlled by Pinault, and renamed Aurora.
Pinault's exclusion from a settlement, which would provide him protection, remained the main bone of contention that caused the French to turn down an earlier US proposal.
Commentators and left-wing politicians have suggested that Chirac intervened to prevent an agreement last week because it did not cover his friend.
Chirac denied that he had personally intervened to squelch the deal.
The new settlement became possible after Pinault agreed that Artemis would pay the 185 million dollars US authorities were seeking from him in earlier proposals, a source close to the matter said.
Another source said Thursday that the French-US agreement was largely in line with a compromise proposed by US authorities but rejected by France on December 2.
Under the agreement being hammered out, on top of the French state's 475 million dollar fine, Credit Lyonnais would pay a fine of 100 million dollars but would keep its banking licence in the United States, where 10 percent of its sales are made.
Artemis would pay 185 million dollars and Maaf, a French insurer also involved in the case, would pay 10 million dollars.
The fate of the Credit Lyonnais chairman at the time of the deal, Jean Peyrelevade, was still being discussed, Mer said.
US prosecutors suspect that Peyrelevade had been aware of the illegal nature of the Executive Life acquisition.
But he has consistently claimed his innocence, insisting he did not learn of problems with the transaction until well after its completion.
"I want to be included in the agreement and I am waiting to hear how the French government will put into practice its desire that I be part of it," Peyrelevade told AFP.
The latest draft settlement would only spare French parties from facing a criminal case. A civil trial is set to open in 2005 that could potentially cost several billion more.
More than 330,000 Executive Life policyholders are seeking 2.5 billion dollars that Credit Lyonnais and Artemis were believed to have made in profit on the insurer's assets, according to lawyers for the policyholders.
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