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EPE ANNOUNCES DISMISSAL OF COUNTERCLAIMS BY RECEIVER IN CONNECTION WITH FIRST SERVICE LIFE LITIGATION

 EPE ANNOUNCES DISMISSAL OF COUNTERCLAIMS BY RECEIVER
 IN CONNECTION WITH FIRST SERVICE LIFE LITIGATION
 EL PASO, Texas, Oct. 21 /PRNewswire/ -- El Paso Electric announced today that the receiver of First Service Life Insurance Company ("First Service") appointed by the State of Texas has voluntarily dismissed with prejudice all counterclaims against the company and other counter-defendants in connection with the company's purchase of annuities from First Service.
 Pursuant to a court order entered Oct. 16, 1992, the receiver is now limited to asserting defenses in the company's pending action against First Service and the receiver. The company's pending lawsuit seeks (i) a declaratory judgment that it has an enforceable security interest in collateral granted to the company by First Service to secure payment of the annuities and is entitled to enforce the security interests; (ii) enforcement of the security interest through foreclosure on the collateral; and (iii) damages for bringing a frivolous action against the company.
 The receiver had previously asserted counterclaims against the company and others, alleging a conspiracy; participation in a conspiracy and breach of trust to injure First Service and its policyholders and creditors; and seeking actual and punitive damages totaling $350 million. These counterclaims have been dismissed with prejudice, as well as any other claims the Receiver could have asserted. In return, the company has agreed not to assert any further claims against the receiver.
 The receiver's voluntary dismissal follows a ruling on May 8, 1992, by the court in which the lawsuit is pending that (i) the company did not violate any provision of the Texas Insurance Code, or other provision of law, by contracting for, and receiving, a security interest in collateral to secure performance of contracts of annuity, or purchasing contracts of annuity from First Service, which did not have a license to conduct an insurance business in Texas; (ii) the contracts of annuity are not unenforceable because they were purchased from an unlicensed company; and (iii) the security interests are not unenforceable because they secure the performance of contracts of annuity.
 In addition, this action by the receiver follows the finding of a jury on July 23, 1992, in a U.S. District Court in Midland, Texas, that the company and two former officers were not guilty of charges stemming from the sale of the annuities by First Service to El Paso Electric.
 The trial on the company's action has been set for Jan. 25, 1993. The developments described above limit the issues to be determined at the trial to (i) whether the company has valid and enforceable security interest in the collateral; (ii) whether the security interests are perfected; (iii) whether the company has the right to foreclose on the collateral; and (iv) any damages the company may be entitled to recover for filing a frivolous claim against the company.
 El Paso Electric Company, which filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code on Jan. 8, 1992, is an electric utility serving approximately 250,000 customers in El Paso, Texas, and an area of the Rio Grande Valley in West Texas and Southern New Mexico.
 -0- 10/21/92
 /CONTACT: Alan Lee Bunnell of El Paso Electric Company, 915-543-5823/
 (ELPAQ) CO: El Paso Electric Company ST: Texas IN: UTI SU:


MA -- NY090 -- 2956 10/21/92 13:52 EDT
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Publication:PR Newswire
Date:Oct 21, 1992
Words:552
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