Tape Suggests Greenberg Pushed Hard For Gen Re Deal

HARTFORD, CONN.--Former American International Group Chairman Maurice Greenberg pressed for action on a suspect reinsurance transaction with a barrage of telephone calls to the head of General Reinsurance at the time, according to one participant in the deal.

Mr. Greenberg's actions related to an alleged sham transaction that prosecutors say falsely inflated AIG loss reserves by $500 million, and were discussed on a tape that was played here today for a federal jury. The panel is hearing the case of five insurance executives accused of securities fraud.

When the 2000-2001 accounting came under investigation in 2004, Mr. Greenberg, then AIG chairman and chief executive, was forced from his post. He is an unindicted co-conspirator in the case.

Those on trial are:

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

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

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.

Testifying for a second day today was government witness John Houldsworth, a former chief executive at Cologne Re Dublin, who has pleaded guilty to charges resulting from the deal between AIG and his firm.

At one point during his testimony Assistant U.S. Attorney Eric Glover played a tape on which Mr. Houldsworth, speaking with one of his superiors at Cologne Re's London headquarters, related that Ms. Monrad had told him "Hank [Mr. Greenberg] is calling Ron [Ferguson] almost every day" to check on the deal.

Mr. Houldsworth in giving evidence said that Cologne Re saw the deal as something that would make it look good to parent firm Gen Re, which stood to make the company $5 million.

He said there had been some discussion about whether to involve lawyers in the transaction, but when Mr. Glover asked if anyone had asked for a legal opinion whether the deal was legitimate, Mr. Houldsworth responded, "No, we did not."

Mr. Houldsworth testified that he had personal doubts about whether the transaction could satisfy accepted accounting standards but also worried that AIG might approach a competing firm about a similar deal for a lesser fee.

For this reason, he said, he wrote an e-mail that was introduced today as evidence, in which he said that structuring the finite reinsurance deal was "probably a waste of time."

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

The Cologne Re telephone conversations 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.