A Los Angeles jury Thursday awarded $700 million in punitive damages to state insurance regulators in their long-running fraud lawsuit against a French firm that bought billions of dollars in junk bonds from the portfolio of failed Executive Life Insurance Co.

But the jury's damage award against Paris-based holding company Artemis S.A. was immediately called into question because the jury did not assess any compensatory damages in the case. Under U.S. law, punitive damages are limited to 10 times the compensatory damages. That matter is now pending before U.S. District Judge Howard Matz.

In May, the federal court jury found that Artemis conspired with banking firm Credit Lyonnais and several other French investors to defraud California regulators. However, the jury cleared Artemis owner and billionaire Francis Pinault of wrongdoing.

In a statement Thursday afternoon, Insurance Commissioner John Garamendi praised the verdict.

"Today the jury found by clear and convincing evidence that Artemis S.A. was guilty of fraud, oppression or malice against the Executive Life estate and deserved to be punished," Garamendi said. "This award of $700 million will be a great help to policyholders as they attempt to recover from the financial damage caused by this fraud."

Executive Life collapsed in 1991, forcing a state takeover of the company and its 330,000 policyholders. At risk were more than $4 billion in annuities sold by Executive Life mostly to elderly retirees. In 1992, Garamendi, seeking to maximize the assets available to pay the annuities, sold the insurer's portfolio to an investor group including Artemis that was financed by Credit Lyonnaise. The junk bond portfolio subsequently rose in value even as many annuity holders saw reduced payments.

In 1999, the state Insurance Department sued the French investors, alleging they had conspired to give Credit Lyonnaise control over the assets in violation of a California law prohibiting foreign owners of insurers doing business in the state.

Credit Lyonnaise and several other investors reached an out-of-court settlement with Garamendi in February for $600 million.

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