HARTFORD, CONN.--An executive, who pleaded guilty to a role in an accounting fraud by American International Group, told a federal jury he admitted his guilt because he believed he was wrong in doing what he did.

John Houldsworth, a former chief executive at Cologne Re Dublin, testified as a government witness at the trial of five other executives accused of participating in a scheme to inflate AIG loss reserves by $500 million.

Mr. Houldsworth in 2005 pleaded guilty to one count of conspiracy to file false financial reports, falsify bank records and accounts and mislead auditors.

The illicit deal he admitted to involved a finite reinsurance transaction between General Reinsurance and AIG in 2002 and 2001.

Those on trial are:

o Christian Milton, of Winnewood, Pa., formerly AIG's vice president of reinsurance.

o Former Gen Re Chief Executive Officer Ronald E. Ferguson of Fairfield, Conn.

o Elizabeth Monrad, of New Canaan, Conn., former Gen Re chief financial officer.

o Robert Graham, of Westport, Conn., former Gen Re senior vice president and assistant general counsel.

o Christopher Garand, of Upper Saddle River, N.J., formerly a Gen Re senior vice president and chief underwriter for U.S. Gen Re's finite reinsurance operations as well as a director of Cologne Re Dublin, a Gen Re entity.

Mr. Houldsworth, an Irish citizen who was a former auditor with Deloitte Touche, under questioning from prosecutors said he had pleaded guilty because, "I felt I'd done something wrong. I'd been involved in a transaction that allowed AIG to misrepresent its books."

Speaking with a light brogue, the witness said he was contacted about the proposed deal by telephone by Ms. Monrad who told him that Mr. Ferguson, the Gen Re CEO, had been contacted for help with the transaction by then AIG CEO Maurice Greenberg.

Mr. Greenberg, an unindicted co-conspirator in the case was forced from his post at AIG when the insurer's accounting moves came under investigation.

Mr. Houldsworth said he could sense that what they (AIG) wanted was a boost in loss reserves, but he couldn't figure out how the accounting would be handled and, as he told one of his London managers, Ms. Monrad's message "was so incomplete it's frightening."

That bit of conversation with the London office was on a tape that was played to jury.

Cologne Re telephone conversations, a major piece of prosecution evidence, were automatically taped because the company wanted a record in the event of any disputes over trades and investment deals. However, they originally were to have been recorded over every 30 days.

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