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The U.S. Department of Justice intends to issue a criminal indictment against Credit Lyonnais in connection with its alleged illegal 1992 acquisition of Executive Life, a defunct California insurer, the French bank confirmed May 13. French news agency Agence France-Presse quoted a statement the bank issued that said, “It’s true that the federal prosecutor in California has told lawyers for Credit Lyonnais and the CDR that it intends to arraign the two institutions.” CDR is an acronym for Consortium de Realisation, a successor company to Altus Finance, the former Credit Lyonnais subsidiary that is suspected of purchasing Executive Life illegally. “With the prosecutor’s consent, the affair is being re-examined by the competent federal authorities,” the bank’s statement said. “These authorities are not expected to make a decision before several week’s time.” Credit Lyonnais’ announcement followed a report May 12 about the planned indictments in the French daily La Liberation. If filed, the charges would follow civil suits already lodged by the state of California and a rival group of bidders for Executive Life’s assets against the bank and the CDR. Those suits charge that Credit Lyonnais used a small French insurer, MAAF, as a front to surreptitiously win control of Executive Life’s insurance operations. At the time, U.S. law barred banks from owning life insurers. Moreover, California prohibited state-owned entities such as Credit Lyonnais, which the French government then controlled, from owning California insurers. The sale of Executive Life’s insurance assets coincided with Credit Lyonnais’ separate purchase of Executive Life’s $6.4 billion junk bond portfolio at a fire-sale price of $3.25 billion. The bonds soared in value, earning Credit Lyonnais a huge profit. In itself, the purchase of the bonds was legal. But California authorities have sought to portray that deal as part of a broader, fraudulent scheme to capture all of Executive Life. Both California and an investor group led by Hellman & Friedman, a San Francisco private equity firm, which lost a bid to buy Executive Life’s junk bonds, have sued Credit Lyonnais and the CDR for billion of dollars in damages. Copyright (c)2001 TDD, LLC. All rights reserved.

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