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Split verdict in Executive Life case leaves Garamendi still twisting
Dan Walters, Sacramento Bee Columnist
May 13, 2005

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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.