Exec Life Jury to Consider Damages

The jury in the long-running Executive Life Insurance Co. court case will reconvene July 12 to begin deliberating whether damages should be paid in connection with the collapse of the insurer.

U.S. District Judge A. Howard Matz scheduled the jury’s return to the courthouse in downtown Los Angeles after the failure of settlement talks between state Insurance Commissioner John Garamendi and French billionaire Francois Pinault.

Jurors cleared Pinault of wrongdoing in May.

But they found that his company, Paris-based Artemis, conspired with a subsidiary of French bank Credit Lyonnais and other investors to defraud California regulators.

The jury determined that Artemis’ actions caused harm to Executive Life policyholders.

But monetary damages against Artemis, if any, are likely to be minimal, based on an order issued Friday by Matz.

Matz’s order appeared to knock the foundation from Garamendi’s argument that 330,000 Executive Life policyholders lost billions of dollars after a group of investors fraudulently acquired control of the insurer’s multibillion-dollar portfolio of high-risk corporate junk bonds. Garamendi seized the ailing insurer in 1991.

Throughout the trial, Garamendi’s attorneys argued that the commissioner never would have sold the bonds to the investors, led by Credit Lyonnais, had he known that the buyers used a secret “fronting” agreement involving intermediary companies.

Garamendi contended he would have sold the Los Angeles-based insurer and the bonds to the National Organization of Life and Health Guaranty Assns., an insurance industry group that pays claims on failed insurers such as Executive Life.

In his order, the judge specifically prohibited Garamendi from claiming damages based upon his Guaranty Assns. premise. He characterized the commissioner’s theory as being “devoid of credibility.”

Damages, if awarded, could be in the range of $75 million, Matz suggested in his order. In February, Credit Lyonnais and other French defendants settled their part of the case for $600 million.

Earlier in the year, Garamendi’s attorney, Gary Fontana, estimated Executive Life policyholder losses at $4 billion to $4.5 billion.