1 of Executive Life Defendants Settles

Just days before a scheduled trial, one of the lesser players in a multibillion-dollar legal battle over the 1991 collapse of Executive Life Insurance Co. has settled its part of the case with state Insurance Commissioner John Garamendi for $80 million.

Aurora National Life Assurance Co. of Inglewood also agreed over the weekend to provide witnesses to bolster Garamendi’s case during the trial, said Norman Williams, a spokesman for the state Department of Insurance.

Aurora is a unit of Artemis, a holding company owned by France’s Pinault family. Artemis remains a defendant in the fraud and conspiracy case.

Jury selection in what is expected to be a three-month trial is scheduled to begin Wednesday in U.S. District Court in Los Angeles.

Garamendi is seeking as much as $3.5 billion in damages that he claims were suffered by Executive Life policyholders. Garamendi alleges that the policyholders were defrauded by banking giant Credit Lyonnais and the other French companies that purchased the failed insurer and its junk bond portfolio.

At the time of the sale, Credit Lyonnais was controlled by the French government, which could be responsible for paying a large part of any possible settlement or judgment.

Garamendi contends that Credit Lyonnais executives lied to him by not disclosing that the bank would have an illegal controlling interest in Aurora, a California-licensed company formed to take over Executive Life’s insurance business.

The settlement with Aurora, although it involves relatively little money, is a “good development for policyholders,” Williams said.

As part of the deal, Aurora will admit in court that executives of the French insurance company MAAF Vie provided false information to Aurora and state regulators about MAAF’s relationship with Credit Lyonnais, Williams said.

However, an advocate for some of the 350,000 Executive Life policyholders said they were disappointed with the Aurora settlement.

“It’s an extremely weak recovery ... based on the fact that Aurora was the vehicle for the fraud,” said Maureen Marr of the Executive Life Action Network.

The settlement removed one of several impediments that were blocking Artemis from selling Aurora to Swiss Re Insurance Co., said Gary Fontana, Garamendi’s special counsel.

Aurora attorney Ted Miller couldn’t be reached for comment.