Posted on 01/22/2004 2:16:48 AM PST by calcowgirl
LOS ANGELES, Jan 20 (Reuters) - French bank Credit Lyonnais and a French government agency pleaded guilty on Tuesday to U.S. felony charges stemming from the takeover of a failed California insurer as part of a $772 million settlement reached last month.
Credit Lyonnais, which is now owned by bigger rival Credit Agricole SA. (CAGR.PA: Quote, Profile, Research) , pleaded guilty to misleading U.S. banking regulators about the extent of its interest in companies that took over the failed Executive Life Insurance Co.
The guilty plea will be used in a $3 billion civil case brought by the insurer’s 300,000 former policyholders who say they were shortchanged when Credit Lyonnais and related entities acquired control of the insurer’s multi-billion dollar junk bond portfolio in the early 1990s, a lawyer for the policyholders said on Tuesday. The bank’s U.S. lawyers declined comment on the case.
The defendants, which also include French insurer MAAF and others, last month pledged to pay nearly $772 million in fines and restitution to end the five-year U.S. Department of Justice probe, which had strained U.S.-French relations.
The alleged fraud involved a scheme to hide the illegal involvement of Credit Lyonnais, then owned by the French government, in taking over the insurer and earning billions by selling off its junk bond portfolio.
At the time, U.S. law prohibited banks from owning insurers and state law banned foreign governments from owning California insurers.
The pleas, entered in U.S. District Court in Los Angeles, were part of a series of interlocking agreements struck by the U.S. prosecutors in the wide-ranging investigation, which has resulted in indictments against two former Credit Lyonnais chairmen and executives of related companies.
U.S. District Court Judge Dickran Tevrizian sentenced Credit Lyonnais to $200 million in fines and restitution, and three years probation. Under the probation terms, Credit Lyonnais may not violate U.S. banking laws or retaliate against anyone who cooperates with U.S. prosecutors.
Consortium de Realisation S.A., a French government agency that rescued Credit Lyonnais after it later ran into financial trouble, also pleaded guilty to three felonies and agreed to pay $375 million into an escrow account pending resolution of a civil lawsuit filed by the California Department of Insurance.
CDR was not placed on probation but also was warned against retaliating against others who cooperated in the probe.
MAAF chairman Jean Claude Seys, 65, became the first individual to plead guilty in the probe -- to two felony counts of making false statements to U.S. regulators.
As part of his plea agreement, Seys was expected to be fined $250,000 and sentenced to five years probation and banishment from the United States when he is sentenced on Wednesday.
Seys, who appeared in person at the nearly four-hour hearing on Tuesday, agreed to cooperate with U.S. investigators.
MAAF also pleaded guilty to three felony counts of making false statements to U.S. regulators on Tuesday. The company was expected to be sentenced to three years probation and $10 million in fines on Wednesday.
Seys and his attorney declined to comment on the plea after the hearing.
U.S. prosecutors said they are expecting to take guilty pleas sometime next month from Dominique Bazy, a Credit Lyonnais executive committee member, and from Eric Berloty, a partner in a French consulting firm that provided financial services for bank subsidiary Altus.
Former Credit Lyonnais chairmen Jean Peyrelevade and Jean Yves Haberer were indicted on a range of charges, including conspiracy, mail fraud, wire fraud, and making false statements to U.S. banking regulators, according to court documents.
Peyrelevade has maintained his innocence and vowed in December that he would defend himself like "Asterix before the Imperial justice."
A separate settlement resolved all federal claims against French billionaire Francis Penult and his holding company, Artemis S.A., which agreed to pay $185 million in fines.
January 20, 2004
North County Times
Source: Nctimes.com
LOS ANGELES - A French bank that hid its role in buying the multibillion-dollar “junk bond” portfolio and business of a failed Los Angeles insurer pleaded guilty today and was ordered to pay $100 million.
Credit Lyonnais entered its plea before U.S. District Judge Dickran Tevrizian to three counts related to the falsification of facts and documents filed with the Federal Reserve. The company has already paid its fine to the U.S. government, prosecutors said.
The French government banking agency unit Consortium de Realisation Enterprises -- which prosecutors say acquired the bank’s “nonperforming assets” in 1995 -- has also paid the penalty agreed to in its plea deal, prosecutors said.
The $375 million will be held in a settlement fund pending the outcome of a civil lawsuit by state Insurance Commissioner John Garamendi, who seeks to distribute the money Executive Life made on the bonds’ sale to some 350,000 policyholders who lost benefits.
A representative for CDR-E today formally entered a guilty plea to three counts of making false statements to the Federal Reserve.
A representative of MAAF Assurances S.A., a major French mutual insurance company, also appeared in court today to enter a guilty plea on behalf of the company to two counts of making false statements in connection with the case.
MAAF Chairman Jean-Claude Seys pleaded guilty on his own behalf to two counts related to false representations before the Federal Reserve.
At a hearing set for tomorrow morning, MAAF will be ordered to pay a $10 million fine, provided the judge does not divert from the binding plea deal.
According to the terms of Seys’ plea deal, he will be ordered to pay a $250,000 fine and be barred from entering the United States for five years.
Credit Lyonnais also must pay a $100 million penalty imposed by the Federal Reserve, authorities have said.
The long-running case stems from the sale of the assets of junk bond-laden Executive Life, once California’s largest life insurance company.
It was declared insolvent and seized on April 11, 1991, by the California Department of Insurance under Garamendi’s earlier tenure as insurance commissioner. At the time, it was a U.S. record insurance insolvency.
As conservator of Executive Life’s assets, Garamendi oversaw the rehabilitation plan, including the final sale of the company to the French investment concern.
At the time, the French bank was barred from conducting the transaction under federal and state law.
The plea deals with the four defendants were announced last month along with an indictment naming six French businessmen, including Jean Peyrelevade and Jean-Yves Haberer, both ex-chairmen of Credit Lyonnais, which prosecutors say hid its role in buying the multibillion-dollar “junk bond” portfolio and business of insolvent Executive Life Insurance Co. in the early 1990s.
Also named in the indictment were:
former Credit Lyonnais general manager and financial director Francois Gille;
Jean-Francois Henin, who was the managing director of Altus Finance S.A., a Credit Lyonnais subsidiary prosecutors allege was used to hide the bank’s role in the purchase;
former Altus consultant Eric Berloty; and
Dominique Bazy, a former Altus chairman U.S. Attorney Debra Yang has said is in plea negotiations with her office.
Francois Pinault, who controls holding company Artemis S.A., previously pledged to cooperate with the U.S. government in the case and agreed that his company will pay $185 million, prosecutors said.
Authorities said $110 million of that sum will be distributed to former Executive Life policyholders, with the remaining $75 million held in the settlement fund pending the outcome of Garamendi’s suit.
Neither Pinault nor Artemis face criminal charges.
Patricia Barbizet, Artemis’s managing director, agreed to pay $1 million and be barred from entering the United States for three years. Marie-Christine de Percin, a former lawyer for Artemis, also agreed not to enter the United States for three years.
The agreements and indictment capped a five-year investigation and lengthy negotiations that strained French-American relations.
Prosecutors say they do not expect to file additional charges in the case.
Garamendi has said his office is still moving forward with the civil case.
21 January 2004
Agence France Presse
Source: channelnewsasia.com
LOS ANGELES : A US judge formally endorsed a massive plea deal settling the fraudulent purchase by French bank Credit Lyonnais of US insurer Executive Life more than a decade ago.
The green light for the settlement came as the bank and other French parties linked to the deal, which became a source of friction between the United States and France, pleaded guilty to fraud-related charges.
US Federal Judge Dickran Tevrizian, sitting in Los Angeles, gave final approval to the plea struck in December between prosecutors, the French banking giant and other French parties to the illegal 1991 acquisition.
The CDR, a government body that manages the assets of the once state-owned bank, French insurer Maaf and its ex-chairman Jean-Claude Seys also pleaded guilty under the terms of the 771.75 million dollar accord.
"It's starting to wind up in criminal court, but this is only the beginning as far as we are concerned," said George Newhouse, a lawyer waging a civil case against the French parties to Executive Life deal.
The bank admitted to three counts of fraud linked to its acquisition of the failed insurer and to its bid to cover up the transaction that flouted both US and Californian laws.
Under the deal, part of the biggest criminal settlement in US history, Credit Lyonnais was sentenced to three years probation and paid a 100 million dollar fine, the largest ever handed over to the Federal Reserve. The deal allowed the bank to escape a potentially long and messy trial that could have resulted in it losing its precious US banking licence. The court was told the money had already been transferred to the United States.
The CDR pleaded guilty to three counts of fraudulently concealing facts of the illegal acquisition of the failed insurer by the bank from the Federal Reserve between September of 1990 and August of 1995. The CDR -- which inherited assets of Credit Lyonnais unit Altus that acquired the insurer's "non-performing assets," in 1995 -- escaped heavy criminal fines and probation under the deal.
But it was ordered to pay 375 million dollars into a fund a settlement fund that could be used to compensate some 350,000 Executive Life policyholders who lost benefits pending the outcome of a civil suit.
After a lengthy warning by the judge on the consequences of pleading guilty, Seys, 65, admitted to two counts -- one relating to the falsification of facts linked to the acquisition of the US insurer by a unit of the bank and another of helping the bank make false statements regarding the transaction.
Prosecutors claim Credit Lyonnais and Altus made secret "parking agreements" under which Altus bought the valuable assets of executive Life and then concealed them with the help of other entities, including Maaf. Those assets included its junk bond portfolio that prosecutors say was worth 3.1 billion dollars.
Maaf admitted to two counts of concealing material facts from US regulators linked to the purchase of Executive Life and to helping Altus conceal its involvement in the illegal acquisition.
The judge however postponed sentencing of both Seys and his former firm Maaf until Wednesday after the five-hour proceedings ran over time.
Under the deal, Seys is expected to be sentenced to five years probation during which he may not enter the United States as well as to a fine of 250,000 dollars.
Maaf was due to be sentenced to three years probation and a fine of 10 million dollars.
The huge "package deal" that in December averted an embarrassing trial at a diplomatically sensitive time between the United States and France, the French parties agreed to pay a total of 771.75 million dollars.
French retail billionaire Francois Pinault, a close friend of President Jacques Chirac, and his firm Artemis -- which acquired Executive Life from Credit Lyonnais in 1992 -- must hand over 185 million dollars, 110 million of which would be handed over to policy holders.
Artemis will also pay 500,000 to compensate prosecutors for legal fees in the long and complex investigation, but both the company and Pinault received immunity from criminal action.
But prosecutors in December also unveiled criminal indictments against six senior French executives, including five ex-Credit Lyonnais chiefs who were not included in the package deal.
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