The French billionaire who made nearly $1 billion off the sale of the junk-bond portfolio of Executive Life Insurance Co. won't face criminal charges in connection with the acquisition of the failed insurer, court documents filed Wednesday confirmed.
Francois Pinault's holding company will pay $185 million -- $110 million of which will be immediately available for distribution to Executive Life policyholders. It is unclear, however, how much Pinault's deal with federal prosecutors will affect a separate lawsuit seeking to recover policyholders' losses
More than 300,000 Executive Life policyholders say they lost $4 billion in 1993 when the insolvent insurer was sold at auction to what appeared to be a group of French investors but were actually fronts for Credit Lyonnais, a bank then owned by the French government, according to the documents. At the time, state and federal laws barred foreign banks from owning U.S. insurance companies.
Credit Lyonnais then sold Executive Life's high-risk bonds to Pinault, whose Artemis holding company owns Gucci and Christie's. Pinault sold the bonds over the next eight years, netting $800 million, "a pretty profit," as his son described it in an interview with a French magazine to be published this week.
Hundreds of pages of documents filed in U.S. District Court on Wednesday confirm the previously reported agreement among Credit Lyonnais, the French government and U.S. prosecutors.
The bank has agreed to plead guilty to fraud and will pay $100 million in fees and fines. In addition to Pinault's $185 million, the French government will kick in $475 million. Some of the money is earmarked for policyholders in the event they win or settle their lawsuit.
According to the court documents, Pinault will neither be charged nor plead guilty, because he fulfilled his obligation under a cooperation agreement he reached with prosecutors in Los Angeles three years ago.
State Insurance Commissioner John Garamendi said he intended to vigorously pursue all the defendants of the suit, including Pinault. "Pinault did not plea to any criminal complaint, but he did pay $185 million," Garamendi said. "Apparently, he must have done something unless he's just a very generous soul."
The U.S. attorney's office declined to comment but has scheduled a news conference for today.