According to an article in The Economist, the Justice Department is preparing to bring criminal charges against French bank Credit Lyonnais and several of it U.S. managers. The move comes as a result of investigations into CL’s 1991 takeover of failed California insurer Executive Life and its junk bond portfolio. Executive Life’s junk bonds were sold to CL, and subsequently transferred to a subsidiary, Altus Finance. Executive Life’s insurance portfolio was acquired by private investors, and renamed Aurora. Both companies are now owned by Artemis S.A., the holding company of French billionaire financier Franois Pinault. The criminal inquiry questioned the nature of the transaction, and the interest CL continued to have in the bonds. Authorities believe that the bank in fact controlled the insurance company’s actions, which at the time breached U.S. law prohibiting banks from owning or controlling insurers. The failure to disclose these links and the actions of CL managers, who apparently arranged for the bank to reap windfall profits from the junk bonds, form the main case against it.
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