Alleging a conspiracy that swindled the California government and Executive Life Insurance Co. policyholders out of billions of dollars, California Attorney General Bill Lockyer is suing a group of companies, including a bank once owned by the French government.

The suit, yet another piece of fallout from the Michael Milken junk bond fiasco, alleges that with the crash of the junk bond market in 1990, and the subsequent collapse of Executive Life due to its $6 billion investment in junk bonds, a consortium of companies led by Altus Finance — a subsidiary of French-owned bank Credit Lyonnais — conspired to pillage Executive Life's assets and circumvent California and federal laws by taking over the defunct insurer.

The suit seeks to recover triple the damages inflicted by the scheme — not less than $2 million — as well as court costs, attorney fees, and civil penalties of $10,000 for each false claim.

According to the complaint, Altus bought Executive Life by using MAAF Assurances, a French mutual insurance company, as a front to fulfill Californian requirements that Executive Life be bought and rehabilitated by an insurance company.

The agreements between Altus and MAAF, known in French as "contrats de portage," made it appear to the California Insurance Commissioner that the French company's offer was legitimate when in fact it was "a sham designed to deceive the State, the Commissioner, the Rehabilitation Court, and the other bidders," says the lawsuit.

This deceit allegedly cost California an opportunity to reap greater benefits from the sale of insurance business and junk bonds and to help resolve many of the claims and disputes about the rights of Executive Life's policyholders.

"By secretly working together, we believe a group that included foreign investors illegally schemed to buy at bargain prices the insurance and bond assets of an insolvent Executive Life, which cheated more than 300,000 policyholders and retirees out of billions of dollars," says Lockyer.

According to the Attorney General's complaint, neither the court nor the insurance commissioner could have approved the sale of Executive Life to the French consortium had they known about the secret contracts.