CREDIT LYONNAIS SUIT DISMISSED

A federal judge has thrown out a lawsuit alleging that Credit Lyonnais and others engaged in fraudulent activity in the 1993 acquisition of the assets of the futile Executive Life Insurance Co, according to the Los Angeles Times. California Attorney General Bill Lockyer filed the suit approximately one year ago, asserting that the French bank eluded a state law barring foreign ownership of insurance companies by disguising themselves under a false business front, enabling them to obtain Executive Life’s junk bond portfolio for $3.2 billion. The allegations arose after former California Insurance Commissioner John Garamendi seized the Executive Life Co. in 1991 in what became the nation’s largest insurance company insolvency at the time. A consortium of French investors acquired the company and its high-risk junk bonds worth $6 billion. Policyholders quickly filed suit in efforts to thwart the sale, arguing that the value of the bonds was worth more than the $3.2 billion agreed to by Garamendi. However, a judge approved the continuation of the sale in 1993. A few years later a whistle-blower alleged that Credit Lyonnais was the purchaser, masking its identity to obtain the insolvent company. Lockyer sought $6 billion in damages for violations of the state’s false claims and unfair competition law, in addition to the federal anti-racketeering act. U.S. District Judge A. Howard Matz ruled that the insurance commissioner has exclusive standing to further press the case. Lockyer’s spokesperson, Sandra Michioku, said Lockyer was considering an appeal to the U.S. 9th Circuit Court of Appeals.

Topics Lawsuits