State Senator Seeks Audit of Exec Life Settlement
Jackie Speier says the $600-million deal shortchanges the insurer's policyholders, who lost billions.
The chairwoman of a California Senate oversight committee has requested an audit of a $600-million settlement between the state Insurance Department and defendants accused of fraudulently acquiring the assets of now-defunct insurer Executive Life.
State Sen. Jackie Speier (D-Hillsborough), chairwoman of the Senate Banking, Finance and Insurance Committee, met with a policyholder group, the Executive Life Action Network, on Friday and agreed to hold a hearing and request the state audit, according to a statement the group released Monday.
The group alleges that Insurance Commissioner John Garamendi settled for too little. The more than 300,000 affected policyholders say they suffered losses of more than $4 billion as a result of the takeover of Los Angeles-based Executive Life in the early 1990s by French bank Credit Lyonnais.
Garamendi's office was closed for Presidents Day on Monday, and messages left for a spokeswoman were not returned.
"We want Mr. Garamendi to explain how he could settle for so little when so many … have lost so much," Sue Watson, co-founder of the Executive Life Action Network, said in the statement.
Speier wanted to know "why insurance consumers were shortchanged as much as $4 billion," she said in a statement.
"We need to hear the whole story and have a complete audit of the funds funneled in and out of the Executive Life estate," Speier said.
The Insurance Department announced Feb. 15 that it had reached the $600-million deal in the lawsuit against Credit Lyonnais, several investors and the French state-funded body Consortium de Realisation, which took over Credit Lyonnais' debts and bad assets before the bank was privatized in 1999.
Sierra National Insurance Holdings Inc., the losing bidder in the 1991 auction for Executive Life's assets and a plaintiff in the suit, is due to receive $75 million. The remaining $525 million — including $375 million that had been placed in escrow as part of a separate settlement of criminal charges between Credit Lyonnais and the U.S. government — will go to the state to help recoup losses for policyholders, Garamendi's office said last week.
Executive Life failed in 1991 after its portfolio of junk bonds lost much of its value. The state took over the insurer and eventually auctioned off its assets.
The junk bonds were sold for $3.25 billion to an investor group led by Jean-Francois Henin, head of Altus Finance, a subsidiary of Credit Lyonnais.
The investors collected billions of dollars from the bonds when the market picked up.
Source: Associated Press
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