Jury Finds French Company Liable In Eecutive Life Case

California Insurance Commissioner John Garamendi has hailed the outcome of the trial as one “that vindicates our longstanding position.” The verdict shows the jury has rejected the idea that the commissioner’s office knew of the scheme before it was uncovered, Garamendi says.

The trial capped a complex tale going back to 1991, when California regulators took over the foundering Executive Life. A year later, Garamendi, who was serving his first term ase commissioner, sold Executive Life’s junk bond portfolio for $3.25 billion to an investor group. The state alleges that the investor group was secretly financed by Credit Lyonnaise S.A., Paris, a bank that was controlled by the French government.

The junk bonds later soared in value and the state sued the French investors, claiming they had conspired to violate a California law that at the time prohibited foreign governments from owning insurers in the state as well as a U.S. law banning banks from owning more 25% of a non-banking business.

Most of the original parties in the case, including Credit Lyonnais, reached a $600 million settlement in February, leaving Artemis as the only defendant.

In February, a group of Executive Life policyholders called on Garamendi to resign for settling for just $600 million in compensation for the loss of nearly $4.5 billion in policyholder assets.