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Thelen Reid & Priest partner Gary Fontana’s long-running crusade in the Executive Life Insurance litigation is finally paying off — for his client and the firm. Last week, Thelen’s client, the California Department of Insurance, announced that it had received $110 million to compensate policyholders that bought insurance from Executive Life, which Insurance Commissioner John Garamendi seized in 1991. Thelen, for its efforts, earned a $14 million contingency fee. The money came from a U.S. Department of Justice criminal fraud probe that settled last December for a record $772 million. The Department of Insurance received a slice in part because it had assisted in the investigation. The settlement — which appears to be the largest sum ever paid to resolve a criminal case — was paid by French bank Credit Lyonnais SA, and other entities that were accused of using fraud to purchase Executive Life’s insurance business and junk bond portfolio. The French bank and others also pleaded guilty to making false statements to federal bank regulators at the time of the acquisition. Under a sliding scale contingency fee agreement, Thelen is entitled to 13 percent of the Insurance Department’s recovery. The fee is equivalent to 6 percent of Thelen’s revenue last year, which was $235 million. And the firm and its client are hoping to collect more. Since 1999, they’ve been pursuing a $2.5 billion civil fraud case against Credit Lyonnais and many of the same defendants in Los Angeles federal court. A trial date is set for February 2005. In light of the outcome in the criminal case, the Department of Insurance looks in good shape to make another big recovery. As part of the criminal settlement, several defendants put $560 million into a reserve to go towards any payouts in this civil suit. Fontana is in Paris this week working on the case. San Francisco partner Karl Belgum, who is working on this matter with Fontana, declined to comment about the fee. Gary Cohen, general counsel of the Insurance Department, confirmed the details of the fee agreement and praised Thelen for “doing an extraordinary job in a very complicated case.” He said the result in the federal case would not have come about if it weren’t for the efforts of Thelen, and Fontana in particular. The contingency agreement hasn’t yet produced a windfall for the firm, according to Cohen. Had the firm billed its normal hourly rates over the past five years, he says it would have received roughly the same amount.

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