NU Online News Service
Four former executives of Berkshire Hathaway's General Re Corp. and one former American International Group official were indicted today by the U.S. Attorney's office in Connecticut for allegedly manipulating AIG's financial statements.
The executives were charged in a multi-count indictment with conspiracy to violate federal securities laws and commit mail fraud, as well as with securities fraud and making false statements to the Securities and Exchange Commission.
The four indicted on 16 counts were:
o Ronald E. Ferguson, of Fairfield, Conn., formerly Gen Re's chief executive officer.
o Elizabeth Monrad, of New Canaan, Conn., formerly Gen Re's chief financial officer.
o Christian Milton, of Winnewood, Pa., formerly AIG's vice president of reinsurance.
o Robert Graham, of Westport, Conn., formerly a Gen Re senior vice president and assistant general counsel.
o Indicted on 10 counts was Christopher P. Garand, of Upper Saddle River, N.J., formerly senior vice president, as well as the head and chief underwriter of Gen Re's finite reinsurance operations in the United States. He was charged with conspiracy to violate securities laws and to commit mail fraud, securities fraud and make false statements to the SEC.
The U.S. Attorney's office said the five were charged with engaging in a fraudulent scheme to make it appear as though New York-based insurer AIG increased its loss reserves. A date for an arraignment hearing has not been set.
The prosecutors allege that what is at issue are "two sham reinsurance transactions between subsidiaries of AIG and Gen Re that were initiated by an AIG senior executive to quell criticism by analysts of an approximate $59 million reduction in AIG's loss reserves in the third quarter of 2000."
The deal, the prosecutors alleged in the 49-page indictment, allowed AIG to increase its loss reserves by $250 million in the fourth quarter of 2000, and by an additional $250 million in the first quarter of 2001. Without the deal, the company would have shown greater reductions in its loss reserves.
AIG restated its earnings in 2005 because of questions raised by the transaction.
The prosecutors also charged that the only economic benefit was an undisclosed side deal of $5 million paid to AIG by Gen Re, a subsidiary of Omaha, Neb.-based Berkshire Hathaway, Inc. The sole purpose of the deal was to calm analyst's criticism, prosecutors allege.
If convicted, Mr. Garand faces a maximum of 160 years in prison and up to $29.5 million in fines. The remaining four could receive a maximum of 230 years in prison and $46 million in fines.
This indictment supersedes a previous indictment of four of the defendants in Virginia earlier this year after a district judge there transferred the case to Connecticut. Mr. Garand was not part of the previous indictment.
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