State Suit Claims French Tycoon Part of Crooked Deal
California Insurance Commissioner Chuck Quackenbush plans to sue one of France’s richest men over his role in the purchase of the assets of ill-fated Executive Life Insurance Co.
Quackenbush said Friday that billionaire industrialist Francois Pinault and corporations controlled by him were among the group of French finance and insurance firms that hid key information when they acquired the assets of Executive Life, allegedly violating state and federal laws governing ownership of insurance companies.
Quackenbush’s naming of Pinault is the latest development in a case now being investigated by the U.S. attorney’s office in Los Angeles and the Federal Reserve Bank in New York.
Last year, the insurance commissioner sued French government-controlled bank Credit Lyonnais, its subsidiary Altus Finance and a consortium of insurance companies involved in acquiring Executive Life’s assets.
The suit arose from the takeover of the insolvent Executive Life by then-Insurance Commissioner John Garamendi nearly eight years ago.
In 1992, Altus paid $3.25 billion for Executive Life’s junk-bond portfolio and loaned $300 million more to a consortium of French firms that separately bought Executive Life’s insurance business.
To seal the deal, Credit Lyonnais officials assured insurance regulators that the bank would not own or manage the insurance business, named Aurora National Life Insurance Co.
But documents obtained by the commissioner’s office revealed that members of the French consortium were not the true buyers. The consortium allegedly had entered into secret “parking” agreements to serve as fronts for Altus. That arrangement, according to court papers, was planned to skirt a host of banking and insurance regulations that prohibit a foreign government entity from owning a state insurer.
Pinault, a former Credit Lyonnais director who now controls some high-profile companies including Christie’s, Gucci and Yves Saint Laurent, profited handsomely from acquiring Executive Life’s assets.
“We have come to the conclusion that Pinault was involved in the conspiracy since the fall of 1992 and has personally recovered the better part of a billion dollars between the bonds and the insurance company profits,” said Gary Fontana of Thelen Reid & Priest, a San Francisco law firm representing Quackenbush’s office.
An attorney for Pinault declined to comment.
Pinault’s Artemis bought a large portion of the junk-bond portfolio from Altus in 1992. The junk bonds later shot up in value. Artemis also acquired a majority ownership in Aurora’s parent company, New California Life Holdings.
The commissioner’s amended lawsuit stated that Artemis knew about the secret parking arrangements but did not disclose them to regulators when it sought--and received--their permission to buy Aurora.
“No one should ever profit from the illegal acquisition of [Executive Life’s] junk bonds and insurance policies at the expense of [the company’s] policyholders,” Quackenbush said in a press release.
Because Quackenbush’s lawyers have already filed a second amended complaint, they would need U.S. District Judge Howard Matz’s permission to name an additional set of defendants including Pinault, Artemis, Aurora and New California.
