France Rejects Executive Life Deal
France said Tuesday that it had rejected a settlement proposal by U.S. authorities over charges arising from the buyout of bankrupt California insurer Executive Life.
In a statement, the French finance ministry said talks with federal prosecutors in California had ended in failure “despite all the efforts made over several weeks.”
This latest round of negotiations lasted six weeks.
Credit Lyonnais, the French bank that secretly acquired Executive Life in 1991 -- when California law barred banks from controlling insurance companies -- would have paid $100 million under the settlement rejected Tuesday. French insurer MAAF would have paid $10 million, and the French state would have contributed $475 million. Credit Lyonnais was state-owned at the time of the buyout.
“We have been unable to reach a global settlement,” said Thom Mrozek, the U.S. attorney’s spokesman in Los Angeles.
The breakdown in the negotiations opens the way for grand jury indictments against France, MAAF and Credit Lyonnais -- which could lose its license to operate in the United States -- as well as some former bank officials.
The announcement by the French finance ministry came after the latest in a series of settlement deadlines imposed by Assistant U.S. Atty. Jeffrey Isaacs expired Monday evening in Los Angeles. U.S. officials had negotiated to the wire with lawyers representing French tycoon Francois Pinault, a close friend of French President Jacques Chirac.
Paris pulled out of a previous draft settlement three months ago and began pushing for a new deal to include Pinault and former Credit Lyonnais boss Jean Peyrelevade, after it became clear the accord on the table would have left them vulnerable to criminal prosecution.
“The French government would like further talks in order to find a definitive settlement,” the French government said.
But the U.S. attorney’s spokesman said: “The discussions aimed toward reaching a global settlement have been concluded.”
Pinault’s holding company, Artemis, made billions from Executive Life’s portfolio of junk bonds, acquired from Credit Lyonnais subsidiary Altus. But the company denies having known that the buyout broke California law.
A U.S. source close to the negotiations said Monday that Pinault’s final offer fell about $75 million short of the $275 million sought by the California Department of Insurance, which has launched a separate civil action.
