Sentences are being handed out in the massive Elf-Acquitaine corruption scandal in France as Loik le Floch-Prigent, the head of the state-run oil company, as well as two other have been given stiff sentences by the French court. Nearly €300m of revenues from the company were used for bribes and kickbacks during the term of former French president Francois Miterrand.
But don’t worry, there’s more Gallic corruption scandal action on the horizon as the Credit Lyonnaise scandal is also heating up.
In April 1991 a California insurance company called Executive Life, having gone bust, became the object of an investigation by the state of California. In 1992 what had once been France’s most successful bank, Crédit Lyonnais (now a decrepit institution), put together a deal whereby the bank would buy Executive Life’s junk bond portfolio, and a new French insurance company would take over Executive Life’s insurance business. At the time of the deal, Crédit Lyonnais was owned by the French state. Under U.S. federal law banks could not own insurance companies; under California law state-owned companies could not own insurance companies. The deal was agreed to because U.S. insurance regulators were assured that the new insurance company was independent of Crédit Lyonnais. In 1995 the French government created the Consortium de Réalisation (CDR) to take over Crédit Lyonnais’ bad assets, including Executive Life’s bond portfolio. But in 1998 it was discovered that the French insurance company that had taken over Executive Life’s insurance business was not independent of Crédit Lyonnais.
The clash of cultures evidenced by the Executive Life mess has led to a decade of legal and diplomatic negotiations. These culminated in September with an agreement by U.S. federal prosecutors to drop the criminal charges, provided the French state hand over $585 million. This was humiliating for France but, in the opinion of many experts, cheap considering the circumstances. However, it later emerged that, because of the separation of powers in America, the agreement did not cover civil suits being brought by California’s Insurance Commissioner and could not guarantee the legal immunity of certain French individuals closely connected with the Élysée Palace, where President Chirac lives in splendor. On Oct. 15, following a long, angry and secret debate within the highest ruling group in France, the agreement was repudiated. Chirac, it is said, made the final decision to slap U.S. justice in the face and challenge it to do its worst.
As they say in America – I’d be careful about letting my alligator mouth get ahead of my tadpole behind if I were President Chirac…