A jury in Los Angeles gave a finding of no damages Monday in a longstanding lawsuit involving the Executive Life Insurance Co. of California (ELIC), the large insurer that was seized by state regulators in 1991 after it was deemed to not be able to carry the weight of its junk-bond portfolio.
The California Department of Insurance (CDI) says it is weighing its next step after the decision by the jury in the U.S. District Court in Los Angeles.
Bloomberg Businessweek reported that the CDI sought up to $4.33 billion in profits and interest from the junk-bond portfolio sold to the French investors in 1991. Artemis S.A. is a French holding company owned by French billionaire François Pinault. It also owns many resorts and other entities, like Converse shoes.
The judge in the case, R. Gary Klausner, indicated his tentative decision to reinstate a $241 million restitution award, according to the CDI. This award was issued by a different District Court judge after the first trial, and later vacated by the Ninth Circuit without prejudice to it being reinstated after the second trial. With interest since the prior trial in 2005, the restitution amount would be substantially larger today.
The current trial was held to determine the amount of damages the ELIC estate incurred as a result of a fraudulent conspiracy, according to the California Department of Insurance. The jury found no damages Oct. 29.
ELIC was taken into receivership by then-Insurance Commissioner and ELIC conservator John Garamendi when the company became insolvent.
In a first trial in 2005, a jury found that Artemis S.A., a French company, participated in a conspiracy to defraud then-Insurance Commissioner John Garamendi in connection with Artemis’ acquisition of ELIC and its assets in 1991 from Garamendi.
“I am disappointed the jury did not conclude, but for the fraud by Artemis and other conspirators, Commissioner Garamendi would have accepted a competing bid from the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). We are considering all options in the wake of this disappointing decision,” said California Insurance Commissioner Dave Jones.
Last year, according to Insurance Insider, Artemis Group agreed to pay $60 million to settle a lawsuit with AIG over the acquisition of an investment portfolio from ELIC.
In New York, an appeal is pending on the liquidation order of subsidiary Executive Life of New York. The Nassau County Supreme Court under Justice John Galasso approved the initial liquidation order of the now Department of Financial Services. Executive Life Insurance Company of New York was taken into rehabilitation in 1991. On April 16, 2012, the Receivership Court granted the superintendent’s liquidation petition and declared ELNY to be insolvent.