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Lyonnais Could Face Fed Penalties

August 29, 2003|From Bloomberg News

Credit Lyonnais, France's sixth-largest bank, may face U.S. regulatory penalties if the company is found to have violated the law in connection with its purchase of Executive Life, Federal Reserve Chairman Alan Greenspan said.

Greenspan's statement came in an Aug. 7 letter to Rep. Doug Ose (R-Sacramento), who had asked at a congressional hearing in July about the status of the Federal Reserve's investigation into Credit Lyonnais' 1993 purchase of the insurer's assets. Greenspan declined to comment on the investigation.

A federal grand jury in Los Angeles already has issued a sealed indictment that includes a charge of making false statements to the Federal Reserve, according to people familiar with the matter. Credit Lyonnais could lose its U.S. banking license if it admits to or is found guilty of wrongdoing.

"If any violations of law by Credit Lyonnais arising out of the Executive Life matter are found, they will be carefully evaluated for appropriate enforcement or other supervisory action," Greenspan wrote.

Paris-based Credit Lyonnais and the U.S. attorney's office in Los Angeles are in negotiations to settle charges over the bank's purchase of Executive Life's assets from court receivership for about $3.2 billion. Prosecutors allege Credit Lyonnais hid its role in the purchase of the California insurer to evade federal and state regulations governing the ownership of insurers.

Credit Lyonnais was owned by the French government until 1999. It was bought in May, pending regulatory approval, by Credit Agricole, France's second-biggest bank.

Ose also had asked whether any criminal guilty plea would affect the Federal Reserve's approval of Credit Agricole's purchase of Credit Lyonnais. Greenspan said Federal Reserve approval is required at this time only for the acquisition of Credit Lyonnais' non-banking business.

Credit Agricole received temporary approval and will have to apply for permanent approval within three months after its tender offer is completed.

When Credit Agricole makes that application, or if it seeks permission to combine its U.S. banking business, "the Federal Reserve will consider the criteria required by statute for approval of such an acquisition, including the financial and managerial resources of the institutions involved," Greenspan wrote.

Ose has urged the Justice Department to indict Credit Lyonnais.

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