- The Washington Times - Tuesday, December 2, 2003

PARIS (AP) — France has rejected a settlement proposal by U.S. authorities over charges arising from the buyout of bankrupt California insurer Executive Life, the French government said yesterday.

In a statement, the Finance Ministry said talks with federal prosecutors had ended in failure, “despite all the efforts made over several weeks.”

The statement said the government had decided “not to approve the latest proposals put by the federal prosecutor in California” to the CDR, the French state holding involved in the affair.

Under the draft deal being discussed, the French government would have paid about $475 million toward the settlement, and insurer MAAF would have contributed $10 million.

Another $100 million would come from Credit Lyonnais, the French bank that bought Executive Life in 1991 and 1992, when California law barred banks from controlling insurers.

Credit Lyonnais was under state ownership at the time.

“We have been unable to reach a global settlement,” said Thom Mrozek, the U.S. attorney’s spokesman in Los Angeles.

The announcement came after the latest in a series of settlement deadlines imposed by assistant U.S. attorney Jeffrey Isaacs expired Monday evening in Los Angeles. U.S. officials had negotiated down to the wire with lawyers representing French tycoon Francois Pinault, a close friend of French President Jacques Chirac.

Paris pulled out of a previous draft settlement three months ago when it became clear the deal would have left Mr. Pinault and former Credit Lyonnais boss Jean Peyrelevade vulnerable to criminal prosecution.

“Since then, intense negotiations have taken place between the federal prosecutor and French parties,” said the statement issued yesterday by the French government.

“These negotiations have unfortunately not been able to meet the conditions for an agreement that would permanently guarantee the French state’s financial interests.”

Without a settlement, Credit Lyonnais, the French state, MAAF and Mr. Pinault face probable grand jury indictments to answer criminal charges including fraud — along with Mr. Peyrelevade and other former bank officials.

If convicted, Credit Lyonnais could lose its U.S. banking license.

Mr. Pinault’s holding company, Artemis, made billions of dollars from Executive Life’s portfolio of junk bonds, acquired from Credit Lyonnais subsidiary Altus. But the company denies having known that the buyout broke California law.

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