Source: http://www.caclo.org/perl/index.pl?document_id=41c9f7e19aea9865d3eb7b441b6c8828
Timestamp: 2019-04-22 04:05:47+00:00

Document:
07/09/2015 - Settlement in Executive Life case versus Artemis S A.
01/10/2014 - Principal and Response Brief of Appellee/Cross-Appellant Artemis S.A.
I am a member of the firm of Thelen Reid & Priest LLP, counsel to Insurance Commissioner John Garamendi in an action pending in the United States District Court for the Central District of California entitled John Garamendi as Insurance Commissioner of the State of California and as Conservator, Rehabilitator and Liquidator of the Estate of Executive Life Insurance Company v. Altus Finance S.A., et al., Case No. CV 99-02829 AHM (CWx) (the "Civil Action"). I am admitted to practice before the courts of the State of California. I make this declaration in support of the motion of Commissioner Garamendi, in his capacity as conservator, liquidator, and rehabilitator (the "Commissioner") of Executive Life Insurance Company ("ELIC"), for an order approving the distribution of $100,000,000 of Altus Litigation Proceeds pursuant to the ELIC Rehabilitation Plan (the "Motion"). I have personal knowledge of the matters set forth herein and could and would competently testify to the truth thereof, if necessary. I have reviewed the Motion, and except as otherwise expressly stated herein, capitalized words or terms used herein have the meanings ascribed to them in the Motion and/or the Rehabilitation Plan, as applicable.
On February 18, 1999, the Commissioner commenced the Civil Action by filing an action in this Court against Credit Lyonnais, S.A. ("Credit Lyonnais"), Altus Finance, S.A. ("Altus"), now known as CDR Entreprises, and Consortium de Realisation S.A. ("CDR"), MAAF, MAAF Vie S.A. (collectively, "MAAF"), Omnium Geneve, S.A., Jean Francois Henin, Jean-Claude Seys and Jean Irigoin. On March 11, 1999, the Commissioner filed a Notice of Related Case pursuant to which he asked that the action, filed generally in the Superior Court for the County of Los Angeles, be assigned to this Court because of its status as the rehabilitation court for the ELIC insolvency. On March 18, 1999, defendants Credit Lyonnais and CDR Entreprises (Altus' new name) removed this action to the District Court pursuant to the provisions of 28 U.S.C. sections 1330(a) and 1441(d) on the basis that they are instrumentalities of the government of France and, as a result, the action was an action against a foreign sovereign state, as that term is defined in the Foreign Sovereign Immunities Act, and the claims against them therefore were within the exclusive jurisdiction of the District Court.
On February 16, 2000, the Commissioner filed his Third Amended Complaint naming new defendants. These new defendants were Aurora National Life Assurance Company ("Aurora"), New California Life Holding, Inc. ("New California") (collectively the "Aurora Defendants"), Artemis S.A., Artemis Finance S.N.C., Artemis America and Francois Pinault (collectively, the "Artemis Defendants"). On April 21, 2000, the Aurora Defendants moved the District Court to dismiss the Commissioner's action on the ground, inter alia, that the District Court lacked subject matter jurisdiction. The Artemis Defendants joined in the motion.
Attached hereto as Exhibit A is a true and correct copy of a tentative ruling issued on June 28, 2000 by the District Court in the Civil Action.
Attached hereto as Exhibit B is a true and correct copy of an order dated July 26, 2000, entered by The Honorable Kurt Lewin in Quackenbush v. Executive Life Insurance Company, Los Angeles Superior Court Docket No. BS006912.
The Civil Action was consolidated for purposes of discovery and pretrial with two other subsequently commenced actions before the same District Court that were brought by other plaintiffs (all three consolidated actions being hereafter sometimes collectively referred to as the "Civil Actions"). The two other actions that were consolidated with the Civil Action are entitled Sierra National Insurance Holdings, et al. v. Credit Lyonnais S.A., et al., No. CV 01-1339 AHM (CWx), and State of California ex rel. RoNo, LLC v. Altus Finance S.A., et al., No. CV 01-8587 AHM (CWx). The Civil Action and the Sierra National Insurance Holdings actions were jointly set for trial in February, 2005. The State of California ex rel. RoNo, LLC action was dismissed and is now on appeal to the U.S. Court of Appeals for the Ninth Circuit, which had certified certain issues to the California Supreme Court for resolution. On August 15, 2005, the California Supreme Court issued a decision on the certified questions in which it ruled that the California Attorney General (the "AG") lacked standing to pursue claims for restitution or damages against the defendants, and that the Commissioner, as conservator and liquidator of ELIC's assets, has exclusive authority to pursue such claims. The Court also held that the California False Claims Act, Cal. Gov. Code, § 12650, et seq., does not apply to assets transferred to the Commissioner in connection with insurance insolvencies. A copy of the decision is attached as Exhibit C hereto.
The relief sought by the Commissioner in the Civil Action includes both damages and restitution based on fraud and conspiracy.
While the Civil Action was pending, the United States Attorney's Office for the Central District of California (the "U.S. Attorney") conducted a lengthy criminal investigation into the involvement of a number of parties, including Credit Lyonnais S.A. and Artemis S.A. ("Artemis"), in various ELIC transactions undertaken in connection with the Rehabilitation Plan. The Commissioner provided substantial assistance to the U.S. Attorney during the investigation in the form of documentary evidence and testimony. Certain of the transactions that were the subject of the criminal investigation are also the subject of the Civil Actions. The criminal investigation resulted in grand jury indictments and the filing of a criminal case, United States v. Credit Lyonnais, et al., No. CR 03-760-DT.
On December 15, 2003, the United States Attorney's Office entered into a Final Settlement Agreement (the "Final Settlement Agreement" or "FSA") with Artemis and various affiliated parties in the Criminal Case. The Final Settlement Agreement was filed with the District Court presiding over the Civil Action on December 17, 2003.
Pursuant to Paragraph 12 of the Final Settlement Agreement, Artemis was required to "establish and fund the 'USAO/Artemis Settlement Fund' by contributing a total of $185,000,000." The $185 Million Settlement Fund was paid by Artemis to the U.S. Attorney on or about March 11, 2004.
As soon as practicable after funding of the [Settlement Fund], the [U.S. Attorney] shall . . . prepare and present for approval to the district court presiding over the Civil Actions payment instructions that, upon delivery to the Depository [i.e., the U.S. Department of Treasury depository maintaining the Settlement Fund under the control of the U.S. Attorney], will direct the Depository to cause [the disbursement of] $110,000,000 (less any required tax withholding) to the California Insurance Commissioner (the "Commissioner"), in his capacity as conservator, rehabilitator, and liquidator of Executive Life Insurance Company of California ("ELIC"), to be disbursed by the Commissioner in accordance with his legal obligations, fiduciary duties, judgment, and discretion . . . to claimants in the ELIC rehabilitation proceeding.
On April 9, 2004, the Commissioner filed with the District Court presiding over the Civil Actions a motion for an order approving certain payment instructions necessary to implement the transfer to the Commissioner of the $110 million victim compensation payment for the benefit of the ELIC estate. In connection with such motion and at the request of the U.S. Attorney pursuant to the terms of the FSA, the Commissioner agreed that the $110 million amount to be disbursed to the Commissioner pursuant to the payment instructions would be credited in favor of the "Artemis Parties" (defined in the FSA to mean Artemis and various affiliated parties) against any amount that any of the Artemis Parties might be responsible to pay under a judgment or court-approved settlement in the Civil Actions.
Attached hereto as Exhibit D is a true and correct copy of an Amended Order issued on May 5, 2004, by the District Court in the Civil Actions.
At the request of Aurora, which is a defendant in the Civil Actions and which is not one of the settling Artemis Parties in the Criminal Case, the Commissioner stipulated that the following language be included in the Amended Order: "This Order does not constitute and may not be cited as a judicial determination: (1) concerning any issue about which claimants should receive distributions and in what proportions; (2) that Aurora's uncovered policyholders are not entitled to receive notice from the Commissioner and an opportunity to be heard in the appropriate forum before any distribution is made by the Commissioner; or (3) concerning whether this Court is the appropriate forum to resolve any distribution dispute."
After extensive negotiations and shortly before trial of the Civil Action was scheduled to begin in late February 2005, the Commissioner reached settlements with several key defendants, including a $525 million settlement with the CDR parties and Credit Lyonnais ($8.5 million of which will be paid by such settling parties directly to the AG in exchange for the AG's release of claims against such parties) (the "CDR Settlement"), and an $80 million settlement with Aurora National Life Assurance Company and New California Life Holdings, Inc. ($1.25 million of which similarly will be paid by such settling parties directly to the AG in exchange for the AG's release of claims against such parties) (the "Aurora Settlement," together with the CDR Settlement, the "February 2005 Settlements"). These settlements were read into the record in the District Court, with definitive documentation to be completed and good faith settlement orders to be sought and obtained from the District Court before consummation of the settlements.
Once the District Court established a procedure for taking default judgments against several non-appearing defendants, the Commissioner proceeded to trial against the remaining defendants, consisting of the Artemis Defendants. After the trial commenced, the Commissioner dismissed his claims against peripheral and/or non-material Artemis Defendants (including Artemis Finance S.N.C. and Artemis America), leaving Artemis as the sole defendant. The Commissioner proceeded to obtain a favorable ruling on the issue of liability, and, on July 21, 2005, the jury awarded punitive damages to the Commissioner in the amount of $700 million. However, no judgment against Artemis has been entered as of the date of this Motion, because: (1) both parties have submitted post-trial pleadings and (2) the District Court has yet to rule on certain equitable claims asserted by the Commissioner against Artemis, and the resolution of such claims will have an impact on the size of any judgment ultimately entered against Artemis.
The process of finalizing the February 2005 Settlements is not complete as there have been (and continue to be with respect to the CDR Settlement) disputes among the parties over some of the terms of the February 2005 Settlements. The parties to the Aurora Settlement have resolved their disputes and executed definitive documentation for the Aurora Settlement in late July, 2005. Consummation of the Aurora Settlement is subject to several conditions precedent, including, without limitation, obtaining final orders from the District Court regarding approval of the settlement and a good faith determination. Until all conditions precedent to consummation of the Aurora Settlement are satisfied, the settlement funds will be held in escrow. With respect to the CDR Settlement, there remains an unresolved dispute among the parties regarding timing and/or related procedural terms of the CDR Settlement. The District Court has appointed a mediator to help the parties try to reach a reasonably prompt resolution of their differences, and the District Court has indicated that it will resolve the dispute shortly if the mediation is not successful. Once such dispute is resolved, the Commissioner and the parties to the CDR Settlement should be in position to execute definitive documentation and to proceed with the appropriate settlement-related motions in the District Court to obtain the necessary orders approving the CDR Settlement and finding it to be in good faith.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed this 22 day of August, 2005, at San Francisco, California.

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