Five AIG & Gen Re Execs Convicted

     HARTFORD – Five insurance executives – four from General Re Corp and one from American International Group – were convicted Monday of 16 counts of securities fraud, wire fraud, conspiracy, and lying to the SEC in manipulating financial statements at AIG. All face possibility of prison time and tens of millions of dollars in fines at their May 15 sentencings.




     A federal jury convicted General Re’s former CEO Ronald Ferguson; its former CFO Elizabeth Monrad; its former vice presidents Christopher Garand and Robert Graham; and Christian Milton, who ran AIG’s reinsurance business. 
     At the heart of the case was a sham transaction, with General Re, that allowed AIG to claim that it had increased its loss reserves by $500 million in 2000 and 2001. This persuaded investors that AIG was capable of paying out increased claims, and raised the share price. In 2006, AIG admitted the accounting was improper, and paid $1.6 billion to federal and state officials to settle charges of illegal accounting, bid rigging and other shenanigans.
     Lawsuits, class-action lawsuits, state attorneys’ general lawsuits against AIG and spinoffs from them are so numerous that Courthouse News no longer bothers to report them.
     Federal prosecutors say they continue to investigate AIG and downstream companies.
     Speculation abounds whether prosecutors will charge AIG’s former CEO Maurice Greenberg, an unindicted co-conspirator who ran the company during the sham transactions that led to this trial. Greenberg already has been repeatedly sued in civil cases, including one filed in 2005 by New York’s then-attorney general Eliot Spitzer.
     Also up in the air is whether the verdicts will raise questions, or spur legal action, against Warren Buffett, the highly regarded and immensely wealthy investor who runs General Re’s corporate parent, Berkshire Hathaway.
     Trial watchers say Greenberg, if indicted, is likely to use an “I don’t do details” defense, and may prevail with it; and that the chance that Buffet will be indicted is remote.

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