Tycoon Francois Pinault is a friend of President Chirac

French groups have agreed in principle to pay $770m to settle the case.

The US authorities say Credit Lyonnais, a French bank, illegally brought failed Californian firm Executive Life through front companies in 1991.

A settlement had been held up by Paris's insistence that top businessman Francois Pinault should be included.

But on Monday, the French Finance Ministry confirmed that a deal covering the government agency Consortium de Realisation, Credit Lyonnais, Mr Pinault's Artemis holding company and French insurer MAAF had been approved.

However the deal excludes individuals being investigated by US prosecutors - notably former Credit Lyonnais Chairman Jean Peyrelevade and his deputy.

Pinault plays his part

Of the settlement total, most comes directly from the French state, with $100m to be paid by Credit Lyonnais itself.

And crucially, French tycoon Francois Pinault has agreed to pay $185m towards the settlement in return for evading criminal charges.

Mr Pinault has been accused of illegally handling Executive Life assets on behalf of Credit Lyonnais, as part of an attempt to disguise the French bank's involvement in the deal.

Under US regulations at the time of the deal, a single foreign investor was not allowed to acquire more than 25% of an American insurer.

Fall-out

The settlement brings to an end one of the bitterest and longest-running disputes in international finance.

The scandal involved much of the French financial establishment in the early 1990s: Credit Lyonnais was state-owned at the time, and enjoyed close relations with government officials.

Mr Pinault, one of the best-known businessmen in France and the current owner of fashion house Gucci and auctioneer Christie's, was believed to have made $1bn from his involvement in the transaction.

Credit Lyonnais, which is now privatised after nearly going bankrupt and being bailed out by the state in the mid-1990s, is still dealing with the fall-out from its activities in the past 20 years.