Executive Life Deal Prompts State Lawsuit

California Insurance Commissioner Chuck Quackenbush on Thursday sued a group of finance and insurance companies backed by the French government, alleging that they hid key information when they took over ill-fated Executive Life Insurance Co. almost eight years ago.

In a suit filed in Los Angeles County Superior Court, Quackenbush said officials of the French firms concealed that they had a secret agreement to purchase the rehabilitated company.

State insurance officials discovered only a few months ago that Credit Lyonnais and other finance and insurance concerns backed by the French government had “parking agreements” to allow a single bank to control and manage the new firm. The “concealment” was meant to skirt state and federal insurance laws prohibiting bank ownership of insurance companies, said Michael J. Stumwasser, a Santa Monica attorney for the insurance commissioner.

Former Insurance Commissioner John Garamendi seized junk bond-laden Executive Life in April 1991, in what was then a record U.S. insurance insolvency. He sold the failed insurer’s assets to the French investors for $3.25 billion. The value of Executive’s assets has tripled in the last few years, Stumwasser said.

Garamendi would not have sold the insurer’s assets to the French firms had he known about the secret agreements, the attorney said.

In a statement, Quackenbush said he was suing “to ensure the foreign financiers who perpetrated this scheme are made to pay, and that fast operators never again think they can manipulate and evade state authority.”

Also named as defendants were Altus Finance, Mutuelle Assurance Artisanale de France, CDR Enterprises, Omnium Geneve and several top executives of those firms. They were unavailable for comment on the lawsuit.