Posted on 05/14/2005 5:16:10 PM PDT by calcowgirl
LOS ANGELES – A federal judge urged both sides to resolve their differences after a jury found that a French company owned by billionaire Francois Pinault conspired to defraud California regulators as part of a scheme to take over failed insurer Executive Life.
However, while ruling on the state's lawsuit, the jury cleared Pinault himself of any involvement in the scheme.
Jurors also considered three allegations that the firm, Artemis SA, had caused harm to Executive Life policyholders. They found in favor of the defense on two of those counts.
The rulings carried no immediate financial judgments. U.S. District Judge A. Howard Matz encouraged the parties involved to reach settlements rather than take the case to a possible penalty phase during which damages might be awarded.
"It's time to stop the posturing. It's time to stop the muscle-flexing." Matz told the attorneys.
The state took over the bankrupt Executive Life in 1991. A year later, state Insurance Commissioner John Garamendi sold its junk bond portfolio for $3.25 billion to an investor group financed by French bank Credit Lyonnais.
The junk bonds later jumped in value and were worth billions of dollars more.
In 1999, the state Department of Insurance sued the French investors, claiming they had conspired to effectively give Credit Lyonnais control over all of Executive Life's assets, thereby violating California law at the time prohibiting foreign governments from owning insurers in the state.
California was seeking about $1 billion in damages and interest from the lawsuit.
After the verdicts, attorney Gary Fontana, who represented the state, said the case had been "extraordinarily difficult." He declined to characterize whether the split verdict on Artemis and Pinault represented a win or loss for the state.
"The jury did come back and find that there was a conspiracy. Artemis joined the conspiracy," he said.
Defense attorney James Clark said "Mr. Pinault was vindicated totally." He also said it was important to note that the jury had rejected two of three allegations that Executive Life policyholders had been harmed.
"From our perspective, this isn't a home run but it's a triple," he said.
In a statement, Garamendi said the verdict "vindicates our longstanding position" and he believes the state will be able to collect damages in the case.
"Our goal has not been revenge but to return the ill-gotten gains to the policyholders," Garamendi said. "We believe we can either in a judgment or in settlement talks."
After three weeks of deliberations, the jury deadlocked on whether the state proved that it would have sold Executive Life to other buyers if not for the conspiracy.
Most of the original parties named as defendants, including Credit Lyonnais, reached a $600 million out of court settlement in February. Pinault and his company were the only remaining defendants.
Jurors began deliberating on April 18 to tackle an eight-part verdict form with more than 30 questions that would determine the outcome of the case against Artemis.
The 10-week trial challenged the jury to absorb a trove of regulatory and financial details and wrestle with the relationships linking a multitude of French companies and corporate entities.
The judge dismissed at least two jurors during the trial because they kept dozing off in court.
Pinault, one of France's richest citizens, testified for two days through a translator. He denied conspiring to mislead California regulators.
A colorful figure in Europe, he controls an empire that includes such well-known brands as Gucci and Yves Saint Laurent.
During the trial, Pinault's attorneys argued that his purchase of about $2 billion worth of Executive Life holdings was not a conspiracy but simply a business investment made almost a year after Credit Lyonnais had closed on its transaction with Garamendi.
Pinault, his attorneys contended, had no reason to believe there was anything improper or wrong about the sale.
Fontana, who represented the state, presented documents filed by Pinault's company and argued they minimized or omitted the business relationship between his company and Credit Lyonnais and its subsidiaries.
Garamendi took the stand in early March, denying claims that he decided to sue for damages to get a slice of the junk bond windfall that was eventually reaped by the investors.
In 2003, Artemis agreed to pay $185 million toward a policyholder fund and $500,000 to reimburse the U.S. government as part of a plea deal with the U.S. attorney in Los Angeles. The company and Pinault also agreed to cooperate with U.S. prosecutors' investigation and were not charged.
Executive Life had 330,000 policyholders when California took it over in 1991.
This Judge Matz doesn't seem to like his job much, imo.
Split verdict in Executive Life case leaves Garamendi still twisting
Dan Walters, Sacramento Bee Columnist
May 13, 2005
(snip)
Garamendi claimed that the conspiracy verdict "vindicates our long-standing position" but, in fact, it was something less than the smashing victory he may need to offset the political fallout from having sold the company's assets for a fraction of their true worth. The policyholders still blame Garamendi for reducing their annuity payments, and without a big damage recovery, their ire could hurt Garamendi as he runs for lieutenant governor next year.
State Sen. Jackie Speier, a rival for the Democratic nomination, has taken up the shareholders' cause and wants a full-blown state audit - presumably plus public hearings - of the seizure and sale.
Attorney General Bill Lockyer, meanwhile, has his own fraud lawsuit against the parties to the Executive Life deal awaiting a state Supreme Court ruling on whether it can proceed. If that case goes to trial, it will be a replay, at least in part, of the Los Angeles trial and include allegations by the buyers - allegations that Garamendi denies - that he knew at the time of the sale that the true buyer was the French government-owned bank Credit Lyonnais, which later spun off ownership to Artemis. At the time, it was illegal for a foreign government entity to own an insurance company.
Lockyer's suit casts a wider net, including investment banker Leon Black, who as an associate of junk bond king Michael Milken helped assemble the Executive Life junk bond portfolio in the first place, advised the buyers, and reaped a billion-dollar-plus profit from his role in the transaction, although he, too, has insisted that he didn't know that Credit Lyonnais was standing behind the ostensible buyers.
Matz. A Clinton appointee. They all have problems, lol.
Forgot the link...
Dan Walters: Split verdict in Executive Life case leaves Garamendi still twisting
http://www.sacbee.com/content/politics/columns/walters/story/12883109p-13731983c.html
The more dems twisting in the wind, the better. ;-)
A. Howard Matz, U.S. District Judge for the Central District of California at Los Angeles, is presiding over the trial of Hillary Clinton finance chairman David Rosen. Rosen is facing three counts of causing false statements to be filed with the Federal Election Commission in connection with an August 2000 Hollywood gala fund-raiser that Peter Paul produced for Hillary Clinton's 2000 Senate campaign. The government says Mr. Rosen reported that the event cost at most about $400,000. Prosecutors contend the real cost was $1.1 million.
Judge Matz began the legal process by blasting Senator Hillary Clinton's key accuser, Peter Paul, whose allegations spurred the indictment of Rosen. While outlining instructions to the jury, Judge Matz, who was appointed by President Clinton, called Paul "a thoroughly discredited, corrupt individual. He's a con artist. The fact that he is, is already established."
(snip)
Grounds for appeal, one would think, when the Judge assesses guilt,innocence and involvement of others before any evidence is heard.
Garamendi is one of the most frighteningly dishonest and nakedly ambitious people on the California political scene--and that's saying alot given all the competition here. There is no issue he won't turn in order to continue his 10 year run for the governorship.
This Executive Life thing has his finger prints all over it. Someone should really nail this guy.
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