Executive Life Insurance Company ("ELIC") was placed into conservatorship partly due to a decline in value of its multi-billion dollar investment in "junk bonds". A comprehensive rehabilitation plan was adopted and became effective on September 3, 1993. As a part of the plan, ELIC policyholders either elected to accept new coverage ("Opt-In") from Aurora National Life Assurance Company ("Aurora") or elected to opt-out and surrendered their policies for cash. Over the years, enhancement trusts were established as a part of the liquidation of ELIC collected assets, which at various times have been distributed to policyholders that opted-out, or to Aurora to enhance the policy values of the ELIC policyholder that opted-in. Additional funds will become available for future distributions, including funds related to First Executive Corporation Trust. There is ongoing work related to the rehabilitation plan. The FEC distribution occurred on October 31, 2002.
In February 1999, the Commissioner commenced a lawsuit entitled Insurance Commissioner v. Altus Finance S.A. et. al., U.S.D.C. (C.D. Cal) 99-02829 AHM (CWx), against the entities that purchased the junk bonds from ELIC during the rehabilitation, Aurora and the other entities that were purported owners of Aurora's holding company, New California Life Holdings, Inc. ("New Cal."). The suit alleged that the defendants intentionally deceived the Commissioner in order to gain control of ELIC's junk bonds and insurance policies. The suit sought disgorgement of all profit gained by them and, alternatively, all damages caused by their deceit. Approximately $211.3 million dollars recovered from that lawsuit were distributed to Opt Out policyholders.