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Thursday, Dec. 11, 2003

The French government will pay $475 million toward the settlement, the details of which "will be finalized in the next few days," the Finance Ministry said.

Once signed, the deal will remove a potential trouble spot for French-U.S. ties, still suffering from the dispute between Paris and Washington over the war in Iraq.

It also averts the embarrassing prospect of a criminal trial in which the France would have found itself on the docket of a California courtroom, and which could have cost French bank Credit Lyonnais its U.S. license.

Credit Lyonnais confirmed Thursday it had reached an "agreement in principle" with Debra Yang, the U.S. attorney in Los Angeles.

California prosecutors accused Credit Lyonnais of fraudulently acquiring bankrupt insurer Executive Life in 1991-92, when U.S. law barred banks from controlling insurers. The French government is involved because the bank was then state-owned.

Government spokesman Jean-Francois Cope said French tycoon Francois Pinault, a friend of President Jacques Chirac, also agreed to contribute to the settlement.

After the initial buyout, Pinault's Artemis holding company acquired Executive Life and acknowledged it made a profit on its portfolio of junk bonds.

That profit is estimated at more than $1 billion by the California Department of Insurance, which has launched a separate civil suit against Pinault, Credit Lyonnais and the French government on behalf of former Executive Life policyholders who lost money in the bankruptcy.

Sources close to the talks say Pinault agreed to pay $185 million, while Credit Lyonnais would pay $100 million and insurer MAAF $10 million, taking deal's total value to $770 million.

Both sides have given themselves until Monday to finalize the settlement, which contains no guilty plea from Pinault, said a French source close to the negotiations, speaking on condition of anonymity.

A French official said the deal did not cover Jean Peyrelevade, the former Credit Lyonnais boss who denies knowledge of the takeover of Executive Life.

Earlier this year, France came close to a deal with U.S. authorities but pulled out at the last minute when it became clear that Pinault and Peyrelevade would not have been shielded from prosecution.

The government official who spoke to the AP said France now planned to go ahead with the settlement, with or without Peyrelevade.

In its statement, the Finance Ministry said discussions were continuing "to allow individuals who so desire to reach a deal with the California federal prosecutor."

© 2003 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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