Washington--Federal prosecutors here unveiled an indictment today accusing three executives formerly with General Re and one from American International Group with participation in sham transactions to pump up AIG reserves.

The indictment did not name Maurice Greenberg, former AIG chief executive and chairman, who has been fingered in previous proceedings as the mastermind for a scheme that allegedly involved bogus reinsurance arrangements to improve his company's financial picture and stock performance.

In addition to the indictment by a federal grand jury in Norfolk, Va., the four were also hit with a civil suit by the U.S. Securities and Exchange Commission.

The investigation that led to the current charges was once described by Mr. Greenberg as a potential "speeding ticket," but Assistant Attorney General Alice Fisher said that isn't so. "Cooking the books won't earn you a speeding ticket," Ms. Fisher said. "It will earn you a criminal indictment."

Named in the 13-count indictment were:

o Ronald Ferguson, the former CEO of Berkshire Hathaway subsidiary General Re.

o Elizabeth Monrad, Gen Re's former chief financial officer.

o Robert Graham, former Gen Re assistant general counsel.

o Christian Milton, AIG's former vice president of reinsurance.

Charges against them included conspiracy, securities fraud, false statements to the SEC, wire fraud and mail fraud.

(The SEC's civil suit also named Christopher Garand, a senior vice president at Gen Re who retired last August.)

The deals at issue, according to the indictment, began in 2000 after AIG stock prices dropped and the company encountered negative analyst reports.

According to a previous filing in a guilty plea last year by John Houldsworth--former CEO for Gen Re subsidiary Cologne Re Dublin--Mr. Greenberg called Mr. Ferguson and asked if Gen Re could lend AIG up to $500 million in reserves on a short-term basis through a loss-portfolio transfer without transferring any risk of loss to AIG.

What followed was a complex round of transactions involving "falsified books, records and accounts of AIG" to create what appeared to be a number of finite-reinsurance deals but in fact involved no risk transfer, the indictment charged.

Ms. Fisher said that one of the indicted individuals, either in an e-mail or telephone conversation, said that the finite re deals are "like morphine--it is painful to come off them." Under questioning, she would not comment on the details of the conversation.

She described the AIG results in 2000 and 2001 as "good reading, but pure fiction."

Mr. Houldsworth--whose sentence is pending while he cooperates with authorities after a guilty plea to conspiring to violate federal securities law--was named as an unindicted coconspirator in the latest charges.

The charges were brought in Virginia because Alexandria is the location for the SEC's EDGAR filing system, where all public companies file their financial data.

AIG said they had no comment on the case.

Special Reports /

Feds Indict 3 From Gen Re, 1 From AIG

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