Insurance scam to cost Gucci baron

FRANCOIS Pinault, the luxury goods baron whose empire controls Gucci, is in frantic discussions to reach an out-of-court settlement to the long-running Executive Life insurance scandal that could cost him hundreds of millions of dollars.

Pinault, France's third-richest man with a family fortune estimated in July at e4.5bn (£3.14bn), has been left isolated after the French government and former state bank Credit Lyonnais, also threatened with charges, agreed to pay $550m (£346m) in fines and potential damages last week.

Lawyers for Pinault's family holding company Artemis are in talks with attorneys from the California State prosecutor's office about a parallel settlement.

The case arises from the purchase by Credit Lyonnais in 1991 of collapsed Californian insurer Executive Life, and the related purchase by Artemis of a portfolio of junk bonds from Executive Life which Artemis then sold on turning a profit of $2bn. Both Lyonnais and Artemis are alleged to have concealed details of the transactions from US supervisory authorities.

Assistant California prosecutor Jeffrey Isaacs gave Pinault until last Friday evening to reach a deal but the passing of the deadline has been marked only by an intensification of talks. Pinault reportedly offered to pay $60m at the beginning of August to settle the criminal charges but is now expected to face a fine of up to $25m plus the payment of $175m into an escrow account to compensate Executive Life policyholders.

Pinault, who earlier this year handed over day-to-day running of Artemis to his son Francois-Henri, is nonetheless closely involved because he, together with his long-standing lieutenant Patricia Barbizet, were in charge at the time.

Artemis wants to avoid any admission of guilt that would leave it defenceless to a civil case, which is scheduled to start at the end of the year, in which Executive Life policyholders are claiming up to $1bn in damages from Artemis.

Artemis declined to comment on the progress of talks.