Crédit Lyonnais Obtains Favorable Settlement And Concludes A Decade of Executive Life-Related Litigation

On October 8, U.S. District Judge John Walter in Los Angeles approved a settlement between Cleary Gottlieb’s client Crédit Lyonnais (along with Consortium de Réalisation (CDR) (the French state-owned defeasance entity that assumed certain of Crédit Lyonnais’s liabilities in 2000) and AIG Retirement Services (AIGRS), in a litigation relating to the assets of Executive Life Insurance Company (ELIC), an insurance company that the California Insurance Commissioner had seized in 1991. In 1992, Altus Finance, then an investment banking subsidiary of Crédit Lyonnais that was later taken over by CDR as part of a rehabilitation of the group, purchased the high yield bonds of ELIC, and helped to assemble an investor group that ultimately acquired ELIC’s insurance company assets in 1993. As part of the investor group’s acquisition, AIGRS purchased a one-third interest in the ELIC insurance company assets.

After Crédit Lyonnais settled federal criminal and regulatory charges, as well as accusations made by the California Insurance Commissioner, stemming from allegations based on restrictions at the time on a bank’s ownership of an interest in an insurance company, AIGRS sued Crédit Lyonnais and CDR, among others, alleging that it had been defrauded into not bidding for all of the insurance assets in 1993. AIGRS sought $1 billion in damages. In last week’s settlement, concluded on the eve of trial, AIGRS received $150 million.

This settlement should conclude the final chapter in Cleary Gottlieb’s 12 year representation of the bank in this matter.