Witness: French Raised Concern
A top executive of a French company targeted by California’s lawsuit over the collapse of Executive Life Insurance Co. testified Wednesday that she was aware that a French bank was concerned about “American regulations” prohibiting foreign ownership of insurers.
Patricia Barbizet, managing director of French holding company Artemis, appeared in federal court in Los Angeles on Wednesday to deny allegations that Artemis was created as part of a scheme to hide the role of French banking giant Credit Lyonnais in acquiring the assets of failed California insurer Executive Life in 1991.
Barbizet is the highest-ranking executive at Artemis to testify in the case, filed in 1999 by then-Insurance Commissioner Chuck Quackenbush and now being pursued by Commissioner John Garamendi. Artemis is controlled by French billionaire Francois Pinault, who is expected to testify next month.
The state’s suit alleges that Credit Lyonnais, controlled at the time by the French government, used a series of front companies to acquire the junk bond portfolio and the insurance assets of Executive Life. Artemis was created in 1992, when Credit Lyonnais decided to unload the assets as U.S. officials began asking questions, the state alleges.
State law prohibits foreign banks from owning insurance firms licensed to do business in California. The state is seeking about $1 billion in damages and interest from Pinault.
Attorneys for Artemis have argued that Pinault’s firm acquired the bonds in 1992 after Garamendi originally sold them.
Although Barbizet acknowledged Credit Lyonnais’ worries about U.S. regulations, she repeatedly testified that she didn’t know or couldn’t remember when asked about specific details of meetings and letters.
Garamendi’s attorney, Gary Fontana, questioned her about alleged secret parking agreements referred to in French as “portage agreements” between some of the French investors in the deal. Fontana asked Barbizet whether she knew some of the holdings being sold to Artemis were part of the portage agreements.
“I don’t remember,” Barbizet said.
In December 2003, Artemis agreed to pay a $185-million fine to the Justice Department as part of a larger $770-million deal with France to settle a criminal inquiry into the Executive Life transaction. Artemis and its officers weren’t indicted.
As part of the settlement, Barbizet agreed to pay $1 million and to stay out of the United States for three years. Barbizet was given permission to return to the U.S. to testify this week.
In February, the French government, Credit Lyonnais and other defendants agreed to settle with Garamendi for $600 million. Other defendants have settled or opted not to defend themselves.
