A verdict in the criminal trial involving former board members at Cref, the French pension scheme for teachers and public employees, is now set for 11 April.
After a month of hearings at the Paris Tribunal, the appeal trial finally convened on 20 December.
The trial was due to confirm sentences for eight board members, including senator René Teulade, former French minister of Social Affairs, convicted of misappropriation in an 8 June 2011 judgement.
The board members have been accused of giving themselves illegal compensation and fringe benefits, such as free housing in prestigious Parisian flats owned by Cref.
Yann Le Bras, arguing for the Cref’s liquidator on behalf of defrauded retirement savers, claims that more than €3m was diverted in total.
The misappropriation lawsuit is one of three legal actions undertaken to help investors retrieve part of their savings after the Cref retirement fund collapsed and was bailed out by UMR, a mutual firm set up to serve ongoing pensions after drastic measures to restore the scheme’s solvency.
Cref was partly based on a pay-as-you-go system, where the contributions of active workers were directly transferred to retirees to pay their pensions.
With optional contributions – and a demographic imbalance as the number of pensioners increased faster than contributing members – Cref was unable to match solvency requirements required under the French Mutuality Code.
This was the conclusion reached after an investigation was launched in 1998, after the French watchdog called for a general inspection of Umrifen, the mutual managing Cref.
In 1997, the Cref fund accounted for about FRF2bn (€305m) of Umrifen’s FRF20bn in overall assets.
Umrifen subsequently transferred its liabilities to new mutual firm UMR, with a 25% cut in pension rights for Cref members accepting the deal.
As Cref has promised ‘guaranteed’ pensions indexed against public employees’ compensation, more than 6,500 members claimed damages, aided by counsel Nicolas Lecoq Vallon, a lawyer in financial consumer cases, and Stéphane Bonifassi, Francis Terquem and Yann Le Bras.
The French Supreme Court of Cassation found Umrifen guilty of mis-selling and granted more than 5,000 victims approximately €5.5m.
After paying €1.7m, Umrifen went bankrupt, but the liquidator has now sued UMR to repay the remaining €3.8m.
The Administrative Appeal Court found the French state responsible for supervisory failure and ordered the state to refund up to 20% of the victims’ damages.
As for the criminal appeal, the court may order Cref leaders to repay the €3m they allegedly diverted.
A verdict on the case is expected on 11 April.