CA: Full probe of Executive Life giveaway is long overdue

The state's giveaway sale of Executive Life and the insurer's fat portfolio of junk bonds is the gift that keeps on giving - political headaches, that is.

State Insurance Commissioner John Garamendi, who seized the troubled insurer in 1991 and then approved its sale, desperately wants to deflect the onus for the multibillion-dollar debacle that left tens of thousands of disabled and retired annuitants twisting in the wind.

But try as he might to shift the burden onto the French buyers, it appears they will at most cede only a tiny fraction of their huge profits from the transaction.

A Garamendi-sponsored lawsuit against French tycoon Francois Pinault, the ultimate purchaser of Executive Life's assets, and his company, Artemis, largely failed. A Los Angeles federal jury let Pinault completely off the hook. While it found Artemis liable, the presiding judge, A. Howard Matz, issued a post-verdict order that appears to limit recovery to about $75 million - about 2 percent of what Garamendi had sought.

The politics of the situation notwithstanding, it's an investigation that should take place simply because the affair stinks to high heaven.

Garamendi seized Executive Life shortly after his 1990 election, saying it otherwise faced insolvency from its heavy investments in corporate junk bonds. At the time, the company had more than 300,000 policyholders, many of them dependent on income from annuities.

Garamendi quickly arranged a sale to a group of French investors who, ... had the secret backing of a French government-owned bank, Credit Lyonnais, an involvement that violated U.S. law.

Garamendi, who hailed the deal as protecting Executive Life policyholders, later claimed he was duped. But some evidence presented at the federal trial indicated that officials ... were aware of Credit Lyonnais' involvement before the sale was concluded.

Or, perhaps directly related to this thread:

http://www.salon.com/news/feature/2005/02/15/arnold/index_np.html

Feb. 15, 2005
The truth about Arnold

The Schwarzenegger-Shriver economic disclosure statement filed in December 2003 reveals that the couple sold millions of dollars' worth of corporate stocks when the governor assumed office and set up a blind trust. Yet at the time Schwarzenegger's blind trust was created, he and Wachter were jointly invested in 10 partnerships, including Acacia Partners (which deals in public stocks), Angel Investors (a venture capital firm), Apollo Investment Fund (specializing in leveraged buyouts) and Pinpoint Investors (a stockholder in Cell Guide Ltd., which develops cellphone technology).

http://www.dicar.dk/files/Konferencer/mark_hunter/p16execlifeintro.htm

It was a former Drexel executive who helped find a buyer for Executive Life's junk. Leon Black, ex-chief of mergers and acquisitions at Drexel, had set up a new shop, Apollo Investment Funds. Its clients included a Credit Lyonnais subsidiary called Altus Finance, which gave Black $1 billion to invest. Black did not respond to repeated requests for interviews for this article.

http://www.hoovers.com/apollo-advisors,-l.p./--ID__40036--/freeuk-co-factsheet.xhtml

Apollo Advisors earned its reputation as a vulture investor by specializing in distressed assets (junk bonds, troubled companies, real estate). Leon Black, former Drexel Burnham Lambert mergers and acquisitions chief, and twelve other Drexel refugees founded the group, which invested in former Drexel clients after that firm's collapse -- notably the $3 billion dollar junk bond portfolio of failed California insurer Executive Life. Apollo has invested billions from four funds and has launched a fifth fund (specializing in Eastern European real estate investments) that hopes to raise some $4 billion.

http://caag.state.ca.us/newsalerts/2002/02-008.htm

January 30, 2002

(SACRAMENTO) - Attorney General Bill Lockyer today added four associates from former junk bond purveyor Drexel Burnham Lambert to a lawsuit alleging an international conspiracy used to illegally acquire assets held by the state and reap billions of dollars from the State of California and policyholders in the wake of the failure of Executive Life Insurance Co.

The complaint filed earlier against more than a dozen companies and individuals, including Credit Lyonnais, a bank once owned by the French government, was amended Wednesday to include Leon Black, John Hannan, Craig Cogut, Eric B. Siegel and several companies they operated in the alleged scheme.

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Federal Judge A. Howard Matz is a Clinton appointee.

Liberal Lunatic of the Day (5/12/2005) Judge A. Howard Matz
	Posted by Beckwith On Bloggers & Personal 05/12/2005 8:28:31 AM PDT · 3 replies · 392+ views Liberal Lunacy ^ \| 5/12/2005 \| Beckwith 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...

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