HARTFORD, CONN.–Five former insurance executives with GeneralReinsurance and American International Group were found guilty by afederal jury today of all charges stemming from an alleged bogusreinsurance deal that helped AIG improve its financial picture.

The defendants and their families showed no reaction as the juryread the verdict in U.S. District Court here. The five wereconvicted of sixteen counts arising from a conspiracy to create asham finite reinsurance arrangement that helped artificiallyinflate AIG loss reserves by $500 million in the fourth quarter of2000 and first quarter of 2001.

Defense lawyers said there would be an appeal.

On trial were Ronald Ferguson, (former chief executive ofGeneral Reinsurance, a Berkshire Hathaway subsidiary), ChristopherGarand (a former Gen Re senior vice president), Robert Graham (GenRe's former senior vice president and counsel), Elizabeth Monrad(Gen Re's former chief financial officer) and Christian Milton(former AIG vice president for reinsurance).

None of the defendants took the stand. Their defense consistedof an attack on the credibility of prosecution witnesses and anumber of character witnesses.

The jury of nine men and three women spent seven days ondeliberations after 23 days of trial. The defendants were convictedof conspiracy, securities fraud, making false statements to theSecurities and Exchange Commission, and mail fraud.

“This is a very sad day not only for Robert Ferguson, but forour criminal justice system,” said Clifford Schoenberg, an attorneyfor Cadwalader, Wickersham & Taft LLP in New York, representingMr. Ferguson. “The nightmare Ron has been forced to endure thesepast few tortuous weeks continues. We can only hope that Judge[Christopher] Droney or the Court of Appeals will reverse thisgrave miscarriage of justice.”

During the trial Mr. Ferguson's defense argued that he would nothave taken part in a criminal enterprise that could endanger anunblemished 30 year career.

Attorney Anthony Pacheco, representing Mr. Garand, said:“Understandably, Mr. Garand is disappointed by the jury's verdict.Although this is a major hurdle, we will aggressively pursue all ofMr. Garand's rights on appeal. We expect that the Appellate Courtwill fully vindicate Mr. Garand of all of these governmentcharges.”

Fred Hafetz, the attorney for Mr. Milton, vowed to appeal,citing “issues of fairness” as to having his client heard alongwith the other defendants. During the trial Mr. Hafetz sought tohave Mr. Milton's case separated from the others, but Judge Droneyrefused.

Federal prosecutors said the verdict sends a strong message thatinvolvement in financial fraud schemes will not be tolerated.

“The investing public must be able to trust and rely uponcorporate management to provide accurate information in theirpublic filings,” said U.S. Assistant Attorney General Alice S.Fisher of the Criminal Division in a statement. “As theseconvictions demonstrate, executives who violate the criminal lawsby deceiving investors or aiding in that deception will be heldaccountable.”

Chuck Rosenberg, U.S. Attorney, Eastern District of Virginiacalled the verdict “a strong message of deterrence andaccountability” for corporate America.

Mr. Garand faces a maximum of 160 years in prison and up to$29.5 million in fines. The remaining four could receive a maximumof 230 years in prison and $46 million in fines.

All five defendants were released on a $1 million bond untiltheir sentencing on May 15.

In addition to those on trial, the government listed a number ofother executives as unindicted co-conspirators in the case,including Maurice Greenberg, former AIG chairman and CEO who wasforced from the company in 2005 when the case came underinvestigation.

Warren Buffett, chairman of Berkshire Hathaway, the Gen Reparent, was listed as a witness for the prosecution but neverappeared. The jury heard from financial analysts who said the dealhad influenced their evaluation of AIG stock

Also called were two executives–John Houldsworth and RichardNapier–who pleaded to lesser charges in the case and turnedgovernment witness against the other five. Mr. Napier was a formerGeneral Re senior vice president and Mr. Houldsworth was formerlyCEO of Cologne Re, Dublin, an arm of Gen Re that was involved inthe deal.

Prosecutors also introduced into evidence dozens of tapes thatcaptured some of the defendants in conversation about the deal. Therecordings came from a Gen Re system that automatically recordedcalls in case there was an insurance derivative trade dispute.

Mr. Napier testified to conversations he had with Mr. Fergusonwhere the CEO said the deal involved no real risk transfer and hewanted to keep the circle of people involved in the deal small.

In one recorded conversation between Mr. Napier, Ms. Monrad andMr. Houldsworth, Mr. Houldsworth told Ms. Monrad, “If there'senough pressure on at [AIG's] end, they'll find ways to cook thebooks, won't they?” and “We won't help them do that much…We'll donothing illegal,” to which Ms. Monrad replied, “Right.”

In their defense, attorneys argued that none of the executivesintentionally broke the law.

(This story was updated at 5:12 p.m.)