NU Online News Service, Aug. 1, 2:43 p.m.EDT

The convictions of four former executives at General ReinsuranceCorp. and another at American International Group Inc. have beenthrown out by a federal appeals court.

A panel of judges in the U.S. Second Circuit Court of Appealshas ordered a new trial for Ronald Ferguson, former chief executiveofficer of General Re; Elizabeth Monrad, former chief financialofficer of the company; Christopher Garand, former senior vicepresident; and Robert Graham, former assistant general counsel.

Christian Milton, former vice president at AIG, also won a newtrial.

The group was convicted in 2008 after a six-week trial for their roles in analleged bogus reinsurance deal that helped AIG inflate its lossreserves by $500 million.

Ferguson was sentenced to two years in prison later in 2008, followed by sentences offour years for Milton, one year each for Garand and Graham, and 18months for Monrad. All were free on bail as the appeal was heard.

The appeals court says the trial judge should not have allowedprosecutors to show the jury a chart of AIG’s plummeting stockprice after it became known regulators were looking into thealleged 2001 finite reinsurance transaction with General Re, a unitof Warren Buffett’s Berkshire Hathaway.

The mere suggestion that the reinsurance transaction causedAIG’s stock to dive was “without foundation,” and since AIG’s rolein the collapse of the financial market in 2008 was well known, thecharts “prejudicially cast the defendants as causing an economicdownturn that has affected every family in America,” says theruling.

The trial judge also made a mistake with jury instructions, theruling continues.

The case against the former executives was the result of aninvestigation by the U.S. Securities and Exchange Commission andformer New York Attorney General Eliot Spitzer.

Former AIG CEO Maurice “Hank” Greenberg and Howard I. Smith,former AIG CFO, still face allegations related to the finite reinsurancetransaction. Appeals in the case continue to be hashed out.