Thom Mrozek, Public Affairs Officer
(213) 894-6947
thom.mrozek@usdoj.gov
December 18, 2003
CREDIT LYONNAIS
AND OTHERS TO PLEAD GUILTY
AND PAY $771
MILLION IN EXECUTIVE LIFE AFFAIR
TWO FORMER
CREDIT LYONNAIS CHAIRMEN, FOUR OTHERS
INDICTED BY
GRAND JURY IN MASSIVE FRAUD SCHEME
French bank Credit Lyonnais
S.A.; CDR‑Entreprises S.A. (CDR‑E), a subsidiary of the French government
entity that acquired the bank’s nonperforming assets in 1995; MAAF Assurances
S.A. (MAAF), a major French mutual insurance company; and Jean‑Claude Seys, the
Chairman of MAAF, have agreed to plead guilty to criminal charges that they
made false statements to federal banking regulators in connection with the
acquisition of junk bonds and the insurance business of the failed Executive
Life Insurance Company of California.
As
part of a broader settlement agreement, Credit Lyonnais, CDR‑E, MAAF and
Artemis S.A., a holding company controlled by French businessman Francois
Pinault, will pay a cumulative total of $770.5 million. Other individuals
associated with MAAF and Artemis have agreed to pay an additional $1.25 million,
bringing the total settlement amount to $771.75 million – which is believed to
be the largest settlement in a criminal case in United States history.
The
plea and settlement agreements, which were filed yesterday afternoon in United
States District Court in Los Angeles, were announced at a news conference this
morning by United States Attorney Debra W. Yang, FBI Assistant Director in
Charge Ronald Iden and California Insurance Commissioner John Garamendi. In a
press release made from Washington this morning, the Federal Reserve announced
its parallel administrative enforcement action against former Credit Lyonnais
Chairman Jean Peyrelevade and a consent order against Credit Lyonnais.
The
plea agreements, which were executed earlier this week, call for Credit
Lyonnais and CDR‑E to each plead guilty to three felony counts of making false
statements to the Federal Reserve. Credit Lyonnais will pay a $100 million
criminal fine, as well as an additional $100 million civil penalty imposed by
the Federal Reserve. An additional $375 million will be paid by CDR‑E into a
settlement fund available to the California Insurance Commissioner for
distribution to former Executive Life policyholders to compensate them for lost
benefits. These funds will be held in reserve pending the outcome of a civil
lawsuit previously filed by the Commissioner.
MAAF
and its chairman, Jean‑Claude Seys, have each agreed to plead guilty to two
felony charges of causing false statements to be made to the Federal Reserve.
MAAF will pay a $10 million criminal fine. Seys will pay a $250,000 criminal
fine and be banished from the United States for a period of five years.
The
settlement also includes Artemis, which will pay $185 million – $110 million
that will immediately be distributed to former Executive Life policyholders to
compensate them for lost benefits, and an additional $75 million that will be
held in reserve in a settlement fund pending the outcome of the Commissioner’s
lawsuit. Artemis is also paying
$500,000 to compensate the United States Attorney’s Office for costs incurred
during the investigation. Pinault and Artemis are not criminally charged as
they have been cooperating in the investigation since June 2000 in exchange for
immunity from prosecution.
Two
other individuals associated with Artemis are also part of the settlement.
Patricia Barbizet, Artemis’ managing director, has agreed to a three‑year
period of pre‑indictment diversion that requires her to pay $1 million and
prohibits her from entering the United States during the period of her
diversion. Marie‑Christine de Percin, a former lawyer for Artemis, also has
agreed to a three‑year period of diversion that prohibits her from entering the
United States during that time.
In
addition to the plea and settlement agreements, a federal grand jury in Los
Angeles indicted six French nationals yesterday, including two former chairmen
of Credit Lyonnais, on various fraud and other charges for their role in a
conspiracy to illegally acquire the assets of the bankrupt Executive Life.
Executive
Life, which was once the largest life insurance company in California, held a
multibillion dollar portfolio of "junk bonds." In 1991, Executive
Life was declared insolvent and was seized by the California Department of
Insurance. As part of the rehabilitation of Executive Life, both its insurance
business and its junk bond portfolio were put up for sale. Credit Lyonnais,
through its investment banking subsidiary Altus Finance S.A., orchestrated a
scheme in which it obtained Executive Life’s bond portfolio, and used secret
"parking" agreements – referred to in French as portage
agreements – to gain illegal control of Aurora National Life Assurance Company,
a newly formed California life insurance company that acquired the restructured
Executive Life insurance business. These secret portage agreements, and
Credit Lyonnais’ resulting illegal control of the insurance business, remained
concealed until the fraud came to light in the summer of 1998 when an anonymous
whistleblower alerted California authorities of their existence.
The
criminal information filed yesterday in connection with the plea agreements
includes allegations that Credit Lyonnais and Altus concealed from the Federal
Reserve material facts relating to their illegal ownership and control of
interests in two American investment funds, Artemis, and Aurora. The indictment
against the individuals alleges their participation in the scheme through a
wide range of fraudulent practices, including making a series of false
statements to the Federal Reserve, the California Insurance Commissioner and
the court presiding over the Executive Life rehabilitation.
"Through
a complicated series of secret agreements, Credit Lyonnais and others concealed
a web of illegal relationships and transactions between the French bank, its
various subsidiaries, Artemis, MAAF and the sizable assets of the failed
Executive Life," said United States Attorney Debra W. Yang. "These repeated deceptions, which
spanned more than a decade and involved the highest levels of Credit Lyonnais
management, defrauded the United States, California authorities and, most
importantly, the approximately 350,000 policyholders of Executive Life."
"The
investigation of this fraud has taken five years," Ms. Yang continued.
"The unprecedented results we are announcing today would not have been
possible without the support of Attorney General John Ashcroft and the wise
counsel of former Deputy Attorney General Larry Thompson."
The
indictment returned yesterday charges six defendants:
• Jean‑Yves
Haberer was chairman and president of Credit Lyonnais from 1988 until November
1993, and served as chairman of Altus from 1990 until December 1993. He is
charged with conspiracy to commit mail and wire fraud, mail fraud, wire fraud,
conspiracy to defraud the United States and violate the Bank Holding Company
Act, and criminal violation of the Bank Holding Company Act.
• Jean
Peyrelevade, who replaced Haberer, served as chairman of Credit Lyonnais from
November 1993 until he resigned from Credit Lyonnais in October 2003. He is
charged with conspiracy to defraud the United States and violate the Bank
Holding Company Act, criminal violation of the Bank Holding Company Act, and
making false statements to the Federal Reserve, the United States Attorney's
Office and the FBI during the government's investigation.
• Francois
Gille was Credit Lyonnais’ general manager and financial director, and also
served as a director of Altus, in the 1990s. He is charged with conspiracy to commit mail and wire fraud,
mail fraud, wire fraud, conspiracy to defraud the United States and violate the
Bank Holding Company Act, and criminal violation of the Bank Holding Company
Act.
• Dominique
Bazy was a member of Peyrelevade’s executive committee and the Chairman of Altus
from November 1993 until July 1995. He is charged with conspiracy to commit
mail and wire fraud, mail fraud, wire fraud, conspiracy to defraud the United
States and violate the Bank Holding Company Act, and criminal violation of the
Bank Holding Company Act .
• Jean‑Francois
Henin was the managing director of Altus and became an advisor to Pinault and
Artemis. He is charged with
conspiracy to commit mail and wire fraud, mail fraud, wire fraud, conspiracy to
defraud the United States and violate the Bank Holding Company Act, and
criminal violation of the Bank Holding Company Act.
• Eric
Berloty was an Altus consultant in the 1990s on accounting, tax and other
financial matters. He is charged with conspiracy to commit mail and wire fraud
and wire fraud.
These defendants all currently
reside in France. If convicted of the various charges in the indictment, they
all face substantial prison sentences.
"One
of the reasons the FBI investigates white‑collar crime is to help keep the
economy stable," said FBI Assistant Director in Charge Ronald Iden.
"The investigation into the fraudulent business practices of Credit
Lyonnais and its subsidiaries demonstrates that we can and will aggressively
investigate such crimes regardless of their complexity or duration. To that
end, the FBI wishes to make this clear to all corporate and banking executives:
even though we are dedicating substantial resources to the fight against
terrorism, the FBI remains fully committed to investigating significant white‑collar
crime."
An
indictment contains allegations that a defendant has committed a crime. Every
defendant is presumed innocent until and unless proven guilty.
The parties that have agreed to
plead guilty are expected to appear in United States District Court in Los
Angeles early next year.
This
case is the result of a five‑year investigation by the Federal Bureau of
Investigation, acting in coordination with the Board of Governors of the
Federal Reserve System and the Federal Reserve Bank of New York.
Release No. 03‑175