Sixth Defendant Involved in ‘Executive Life Affair’ Pleads Guilty to Deceiving Federal Regulators

A chartered accountant based in Paris pleaded guilty this week to aiding and abetting the concealment of material facts from the Federal Reserve Bank as part of a scheme that helped Credit Lyonnais illegally take over a failed California life insurance company.

Eric Berloty, 51, pleaded guilty to the felony count and was immediately sentenced by United States District Judge Dickran Tevrizian. Judge Tevrizian sentenced Berloty to three years of probation and fined him $50,000.

In 1994 and 1995, Berloty was an accountant for Altus Finance S.A., a subsidiary of Credit Lyonnais. By pleading guilty, Berloty admitted that he helped conceal a series of secret agreements that allowed Credit Lyonnais to take control of the Executive Life Insurance Company of California.

The case against Berloty is part of a larger criminal and regulatory investigation involving the takeover of Executive Life, which was once the largest life insurance company in California. In 1991, Executive Life was declared insolvent and was seized by the California Department of Insurance.

As part of the rehabilitation of Executive Life, both its insurance business and its junk bond portfolio were put up for sale. Credit Lyonnais, through its investment banking subsidiary Altus, reportedly orchestrated a scheme in which it obtained Executive Life’s bond portfolio, and used secret “parking” agreements – referred to in French as portage agreements – to illegally gain control of Aurora National Life Assurance Company, a newly formed California life insurance company that acquired the restructured Executive Life insurance business.

These secret portage agreements, and Credit Lyonnais’ resulting illegal control of the insurance business, remained concealed until the reported fraud came to light in the summer of 1998 when an anonymous whistleblower alerted California authorities of their existence.

In December, a federal grand jury in Los Angeles indicted six French nationals, including two former chairmen of Credit Lyonnais, on various fraud and other charges for their role in a conspiracy to illegally acquire the assets of the bankrupt Executive Life.

Previously in this case, five other defendants have pleaded guilty to various felony charges. They are: Credit Lyonnais; CDR-Entreprises S.A., the successor in interest to Altus; MAAF Assurances S.A. (MAAF), a major French mutual insurance company; Jean-Claude Seys, the chairman of MAAF; and Dominique Bazy, the former chairman of Altus.

As a part of these earlier agreements, these defendants, along with Artemis S.A., a holding company controlled by French businessman Francois Pinault, paid a total of $771 million in fines, penalties and victim compensation.

This case is the result of a five-year investigation by the Federal Bureau of Investigation, acting in coordination with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York.