Artemis Told to Pay $190 Mln to California Regulators

Edvard Pettersson
Bloomberg News
November 22, 2005

Artemis SA, the holding company controlled by French billionaire Francois Pinault, was ordered to pay $190 million to California insurance regulators for its role in the sale of Executive Life Insurance Co. in the 1990s.

California Insurance Commissioner John Garamendi had sought $1.29 billion in restitution for the profits Artemis made from Executive Life's junk bond portfolio and insurance business, because the French company had joined a conspiracy with Credit Lyonnais SA to buy the failed insurer in violation of California and U.S. law.

"Artemis was not some innocent enterprise that Francois Pinault created as a vehicle to test his self-professed `gut feeling' that rosy business prospects in the United States warranted a multi-billion risk,'' U.S. District Judge Howard Matz said in a ruling today.

Matz last month threw out $700 million in punitive damages a Los Angeles jury awarded against Artemis over its role in the Executive Life sale. The jury found in May that Artemis was liable for harm the Credit Lyonnais conspiracy caused to the Executive Life estate when in 1992 it agreed to buy part of Executive Life's junk bond portfolio from a unit of Credit Lyonnais as well as a controlling stake in the insurance business a few years later.

Interest, Reductions

Artemis had already paid $185 million to cover any award in the California case, said Artemis lawyer James Clark of the firm Gibson, Dunn & Crutcher. That includes a $110 million portion of a settlement with the U.S. Justice Department and $75 million the company paid into a litigation fund. The amount of Matz's award will increase after interest is included.

"Obviously we would have preferred it if the judge had awarded zero dollars in restitution,'' Clark said in a telephone interview. "We really have to see what's going to happen with determining the interest and any offsets from settlements by other parties to know whether it makes sense to appeal this.''

France had previously agreed to pay $600 million to settle the state's claims against Credit Lyonnais, which was acquired by Credit Agricole SA, leaving Artemis and Pinault as the only defendants in the case.

Through Artemis, Pinault, 69, has a controlling stake in PPR SA, formerly Pinault-Printemps-Redoute SA, the Paris-based retailer that owns luxury goods maker Gucci Group and fashion house Yves Saint Laurent. Forbes magazine ranks Pinault, whose investments also include Christie's International Plc, as the world's 76th-richest person, with a net worth of $5.9 billion.

No Personal Liability

The jury had cleared Pinault of any personal liability in the case.

Artemis wasn't formed until late 1992 and wasn't a party in the initial sale of the Executive Life assets. The company became part of the Credit Lyonnais-led conspiracy to defraud the insurance commissioner by making misrepresentations to and concealing information from the California Insurance Department, Matz said in his ruling.

The case is John Garamendi v. Altus Finance et al, United States District Court, Central District of California, CV99-2829.

©2005 Bloomberg L.P.

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