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In April 1991 a California insurance company called Executive Life, having gone bust, became the object of an investigation by the state of California. In 1992 what had once been France's most successful bank, Crédit Lyonnais (now a decrepit institution), put together a deal whereby the bank would buy Executive Life's junk bond portfolio, and a new French insurance company would take over Executive Life's insurance business. At the time of the deal, Crédit Lyonnais was owned by the French state. Under U.S. federal law banks could not own insurance companies; under California law state-owned companies could not own insurance companies. The deal was agreed to because U.S. insurance regulators were assured that the new insurance company was independent of Crédit Lyonnais.
The clash of cultures evidenced by the Executive Life mess has led to a decade of legal and diplomatic negotiations. These culminated in September with an agreement by U.S. federal prosecutors to drop the criminal charges, provided the French state hand over $585 million. This was humiliating for France but, in the opinion of many experts, cheap considering the circumstances. However, it later emerged that, because of the separation of powers in America, the agreement did not cover civil suits being brought by California's Insurance Commissioner and could not guarantee the legal immunity of certain French individuals closely connected with the Élysée Palace, where President Chirac lives in splendor. On Oct. 15, following a long, angry and secret debate within the highest ruling group in France, the agreement was repudiated. Chirac, it is said, made the final decision to slap U.S. justice in the face and challenge it to do its worst.
Besides my reflexive happiness at seeing the French get nervous, I lost money in Executive Life when it went under; it was part of my retirement folio. The amount of money I lost was pretty small, under a thousand dollars, about 15% of which I recovered through the settlement. But I would like to see someone be held accountable for the fraud that took place, and it's encouraging to see that the case hasn't been abandoned all these years.Sphere It View blog reactions
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