Negotiations to end a probe of failed California insurer Executive Life are expected to continue today as France and the United States wrangle over the fate of two French businessmen, a source close to the matter said Tuesday.
Former Credit Lyonnais Chairman Jean Peyrelevade has said he would not admit wrongdoing in any settlement, and French retail tycoon Francois Pinault wants assurance that he can recover at least some funds put aside to cover any future claims, the source said.
Peyrelevade and Pinault came under investigation after the U.S. accused the French bank of illegally buying assets, including a valuable bond portfolio, from Executive Life in 1991, shortchanging policyholders.
Banks were barred from owning insurers under U.S. law at the time. U.S. prosecutors also allege that the bank, then owned by the French government, fraudulently concealed the role of some parties tied to the deal.
Pinault's Artemis holding company bought the junk bond portfolio in 1992 and reaped a windfall on it. Pinault also eventually bought all of Executive Life.
Peyrelevade became head of Credit Lyonnais after the Executive Life purchase, but has denied reading a fax in 1993 that would have alerted him to the illegal nature of the deal. Pinault also denies any wrongdoing.
"They are still discussing the two known points [Pinault and Peyrelevade]," the source said.
Another source close to the matter also said negotiations were continuing and focusing on Pinault and Peyrelevade. A different source close to the case said that senior French ministers were reviewing a detailed proposed agreement dealing with Pinault and Peyrelevade but that their fates had not yet been determined.
Failure to reach a pact could hurt already tense ties between the U.S. and France and could lead Credit Lyonnais, bought by Credit Agricole this summer, to lose its U.S. banking license.
France, which originally had a Nov. 24 settlement deadline, backed out of a preliminary $585-million September agreement because U.S. prosecutors subsequently tried to target individuals, including Pinault and Peyrelevade.
France is concerned that if Pinault and Peyrelevade, a friend of French President Jacques Chirac, are not included in a settlement, U.S. prosecutors could target them separately.
U.S. prosecutors have demanded that Pinault put aside money for any other claims, but Pinault wants a guarantee he can get some if not all of these funds back, one of the sources said. For Peyrelevade it was a question of not admitting any guilt, the source said.
A spokesman for the U.S. attorney's office in Los Angeles said prosecutors had reached an initial agreement with Credit Lyonnais and the French government agency formed in 1995 to sell the bank's assets as part of a restructuring plan, but not with Artemis lawyers.