WASHINGTON (AP) – The Bush administration is weighing whether to bring criminal charges against a French bank being defended by a prominent Washington lawyer who helped the president in the Florida recount.
On Monday, the head of the Justice Department’s criminal division, Michael Chertoff, is scheduled to have a videoconference call with California Attorney General Bill Lockyer and Insurance Commissioner Harry Low.
Lockyer, a Democrat who is seeking re-election, sued the French bank, Credit Lyonnais, seeking $2 billion in damages, alleging that more than 300,000 policyholders were harmed by the bank’s actions.
Federal prosecutors in Los Angeles recommended indicting the bank last April and are still waiting for the go-ahead from Justice Department superiors in Washington, according to lawyers familiar with the investigation who spoke only on condition of anonymity.
Representing the financial institution is George Terwilliger, a former deputy attorney general in the first Bush administration and one of the legal strategists who helped George W. Bush during the Florida recount. More recently, Terwilliger was considered for the post of FBI director. He has been a vocal defender of the president’s plan to use military tribunals in prosecuting the war on terrorism.
In an interview Sunday, Terwilliger declined to say whether he has met with Justice Department officials about Credit Lyonnais.
“Without acknowledging what has or has not occurred in this case, in my own experience at the Justice Department, it was not unusual to both have discussions internally with prosecutors and externally with attorneys for subjects of the investigations,” said Terwilliger.
Credit Lyonnais in 1992 purchased the assets of the insolvent Executive Life Insurance Co. Federal law bars a bank from owning an insurance company and California law prohibits a foreign government from owning an insurance company. The French bank’s secret role as purchaser didn’t come to light until 1998.
Credit Lyonnais may be trying to avoid pleading guilty to crimes that could result in a huge financial payout to West Coast policyholders, said Gary Fontana, an attorney with the San Francisco firm Thelen Reid & Priest, which is representing the California insurance commissioner.
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“What I believe is going on is the French have said to the Justice Department, ‘Don’t make us plead to any of the crimes we are accused of in California because if we do, we may end up owing the policyholders hundreds of millions or perhaps billions of dollars,’” said Fontana.
Terwilliger responded that “suggestions by interested parties of how one case ought to come out in order to benefit their interest in another case are not particularly helpful. Our position in general about related litigation is that each case presents unique issues and ought to be decided on its own merits.”
A spokeswoman for the California attorney general, Sandra Michioku, said that “we and the insurance commissioner are talking with the U.S. Justice Department” and that the state is pursuing the lawsuit.
Credit Lyonnais got into trouble by overborrowing to finance rapid expansion and lending money to some of the worst business failures of the 1990s. The French government eventually led a bailout believed to have cost taxpayers more than $14 billion.
The U.S. government “has never prosecuted a bank that has been rehabilitated,” Terwilliger said.
“A new institution has been created out of the old one,” Terwilliger said, “and to come along after the fact because it’s the corporation’s successor just doesn’t make any sense.
“It puts at risk the investments by both the government and private individuals in the rehabilitated institution.”
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