Credit Lyonnais Boss Forges Ahead With Libel Suit

by Robin Pilgrim, LawAndTax-News.com, London

20 March 2003

A libel suit lodged against UK business weekly, The Economist, by Credit Lyonnais chairman, Jean Peyrelevade is set to be ruled upon by a Paris court on May 16.

M. Peyrelevade filed the suit against the magazine following claims in a 2001 article that he knew - or at any rate, should have known - that the bank was in breach of US banking laws over its purchase of US insurer Executive Life, after his deputy, Dominique Bazy received a 17 page fax detailing the regulatory issues involved.

However, according to an AFX News report this week, the Credit Lyonnais boss told the court that he had no knowledge of the content of the fax 'because it was not addressed to him', and that he in fact knew nothing of the problems surrounding the acquisition of the failed insurer until 1998, five years later.

The scandal surrounding Credit Lyonnais' purchase of Executive Life dates back to 1991, when the California Insurance Department seized the latter company after its $9 billion junk bond portfolio collapsed. The state authorities sold the bonds to Altus Finance (at the time, a Credit Lyonnais unit), and the company's insurance portfolios to Aurora National Life Assurance Company (also allegedly controlled by Credit Lyonnais, albeit via a secret agreement).

However, under the - now repealed - Glass-Steagall Act, banks were not permitted to own insurers, and when the California Insurance Department discovered what had taken place in early 1999, it sued the bank, alleging fraud, and seeking some $2 billion in restitution.

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