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Banking industry

California Reaches Tentative $600 Million Settlement with French Agency and Credit Lyonnais

Strategic Insights

— 1 min read

California's long-standing lawsuit against a French government agency and Credit Lyonnais, a French bank, has finally reached a tentative $600 million settlement. The settlement stems from the 1991 sale of the Executive Life Insurance Company, which was declared insolvent by state insurance regulators. The state's lawsuit accused Credit Lyonnais of concealing its interest in companies that acquired Executive Life's junk bond portfolio, depriving 300,000 policyholders of profits.

Key Takeaways:

  • The settlement is a result of the state's lawsuit filed in 1999 against Credit Lyonnais and the French government agency, accusing them of concealing their interest in companies that acquired Executive Life's junk bond portfolio.
  • The proposed settlement is far below the $3 billion in damages sought by the California insurance commissioner, John Garamendi, when the case was filed in 1999.
  • The settlement hinges on whether Sierra National Insurance Holdings will agree to settle its claims for a portion of the payment, as the two cases were joined in federal court.
  • The state's lawsuit claimed that Credit Lyonnais' actions resulted in a significant loss of profits for 300,000 policyholders.
  • Credit Lyonnais was accused of concealing its interest in companies that acquired Executive Life's junk bond portfolio, which was sold for a fraction of its value and later sold at a huge profit.

Statistics:

  • $600 million: The tentative settlement reached between California and the French government agency and Credit Lyonnais.
  • $3.25 billion: The value of the junk bond portfolio sold by Executive Life to the French companies in 1991.
  • 300,000: The number of policyholders who allegedly lost profits due to Credit Lyonnais' actions.
  • 1991: The year in which Executive Life was declared insolvent.
  • 1995: The year in which the French government formed a consortium to assume Credit Lyonnais' debts.
  • 1999: The year in which the California insurance commissioner, John Garamendi, filed the lawsuit against Credit Lyonnais and the French government agency.

Sources:

  • "Credit Lyonnais and French Government Settle California Lawsuit," Bloomberg, February 8 (no date provided)
  • "California Reaches Tentative Settlement with Credit Lyonnais," Reuters, Tuesday, February 8 (no date provided)

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