HARTFORD, CONN–A participant involved in what the government says was a sham transaction to inflate American International Group's financial picture wrote an e-mail shown in court today that joked about how AIG would account for the deal.

The evidence presented at the trial of five insurance executives in U.S. District Court here came as the government closed its case against the group.

They are accused of securities fraud for an arrangement between AIG and General Reinsurance subsidiary Cologne Re Dublin, worked out in 2000, that appeared to boost AIG loss reserves by $500 million in 2000 and 200l.

During testimony from James Tendick, a U.S. postal inspector, the government introduced an e-mail from defendant Robert Graham, Gen Re's former senior vice president and counsel, written to John Houldsworth, a former chief executive at Cologne Re Dublin.

The e-mail discussed how the aggregate loss coverage agreement between Gen Re and AIG would be booked, with Mr. Graham writing that Gen Re planned to enter the cash involved as a deposit, and stating: “How AIG books it is between them, their accountants and God.”

The e-mail was one of hundreds of thousands of AIG and Gen Re documents that were reviewed by a postal team of analysts.

Mr. Houldsworth, who has pleaded guilty in the case and appeared as a government witness, told the jury he knew the deal was improper.

On trial with Mr. Graham are Ronald Ferguson (former Gen Re chief executive officer), Elizabeth Monrad (Gen Re's former chief financial officer), Christopher Garand (a former Gen Re senior vice president) and Christian Milton (former AIG vice president for reinsurance).

Mr. Tendick, before he left the stand, was cross-examined by Mr. Ferguson's attorney, Michael Horowitz, and asked if he was aware of conversations between the Gen Re CEO and Gen Re Chairman Warren E. Buffett.

Mr. Tendick at first said he was not, but the defense lawyer eventually confronted him with a call log showing there had been an hour-long chat between the two in November 2000–about the time that the agreement for the deal was being put together.

The defense, which lawyers indicated will consist mostly of character witnesses, is due to wrap up on Monday and the case could go to the jury on Tuesday.

Special Reports /

AIG Deal Was Joking Topic In E-Mail

Related Stories

Recommended For You