Crusading under a banner of rescuing policyholders, an ambitious California insurance commissioner named John Garamendi let New York financier Leon Black and his pals at Crdit Lyonnais grab Executive Life Insurance for a fire-sale price of just over $3 billion in 1991. Far from helping, the deal left policyholders taking a 40% shaving on their claims, while Leon Black reaped an estimated $300 million.
That deal helped derail Garamendi's run for the California governor's mansion in 1994. He wound up in a dead-end job at the Interior Department.
Guess where Garamendi is working now? At an investment outfit with strong links to--yes, Leon Black. In April 1998 Los Angeles-based Yucaipa Cos., an investment company that's had some big deals financed by Black, made Garamendi a partner. Yucaipa is headed by supermarket mogul Ronald Burkle. Black's Apollo Advisors financed Yucaipa's 1995 acquisition of Dominick's Foods and the merger of Ralph's Grocery Co. with Food 4 Less. Black refuses to talk on the record.
Hard to say just what Garamendi does for Yucaipa. When he took the job, he said he would set up an office in Washington, D.C. To date, Yucaipa has no D.C. office, and Garamendi won't say what he's doing other than confirming that he's a partner.
You may be reading more about Black and Garamendi. Though neither is a defendant, a lawsuit recently filed by Garamendi's successor, Charles Quackenbush, alleges that Black's French buddies acquired Executive Life by fraud (FORBES GLOBAL, Dec. 13).