Citing US Supreme Court cases from 1996 and 2003 as guiding precedent, US District Judge A. Howard Matz of the US District Court for the Central District of California ruled that Garamendi had not suffered sufficient harm to merit that large a punitive-damage award.
The ruling came in Garamendi’s suit against Artemis SA, French billionaire Francois Pinault, and others claiming that but for alleged fraud, he would not have sold Executive Life’s assets to the French consortium in 1993.
“There is no rational explanation, devoid of speculation, for that figure,” Matz said. “The jury found that Artemis’s misrepresentation[s] and omission[s] caused no harm to the Commissioner. It found that the harm the scheme caused to the Commissioner, the amount attributable to Artemis, was zero dollars.”
Jurors, following a 35-day May civil trial, concluded that Artemis, a holding company controlled by Pinault, made false representations and concealed important facts from Garamendi. Pinault’s Artemis’s holdings include Aurora National Life Insurance Co., successor to Executive Life. Jurors in July ordered Artemis to pay $700 million in damages to ELIC policyholders who claimed to have lost billions in the sale of Executive Life’s assets
The Matz ruling is the latest in the 14-year saga of Executive Life. The Los Angeles insurer, once California’s largest insurer, had $10.2 billion in assets, 208,000 life insurance holders, and 164,000 annuity holders before a meltdown in the junk bond market in 1989-1990. Some $1.3 billion has been paid in fines and settlements in what authorities called a complex conspiracy that attempted to defraud policyholders and skirt federal and state laws. A series of federal criminal and state civil actions, along with civil class actions, have been litigated almost constantly since Executive Life imploded.
Matz on September 28 approved a $516.5 million settlement with defendants Credit Lyonnais S.A., Consortium de Realisation S.A., and CDR-Entreprises and Garamendi and Sierra National Insurance Holdings Inc. Credit Lyonnais pleaded guilty and agreed to pay $772 million to settle separate criminal charges. Credit Lyonnais and the French government in February paid $600 million to the state to settle the case.
The latest court order in Garamendi v. Altus Finance S.A.,D.C. C. Cal., No.CV-99-2829, order 10/4/05 is here .