A government witness, who has implicated five executives in an American International Group accounting fraud, admitted on the witness stand today that he had a history of lying to investigators.
John Houldsworth, a former chief executive at Cologne Re Dublin, a subsidiary of General Reinsurance, made his admission under cross-examination by defense attorney Reid Weingarten, who represents Elizabeth Monrad.
Ms. Monrad, Gen Re's former chief financial officer, is on trial with Ronald Ferguson, former Gen Re chief executive officer; Robert Graham, former Gen Re senior vice president and counsel; Christopher Garand, a former Gen Re senior vice president and Christian Milton, former AIG vice president for reinsurance.
The group is accused of securities fraud and other charges related to an alleged sham reinsurance transaction in 2000-2001 between Berkshire Hathaway unit Gen Re and AIG, which inflated AIG loss reserves by $500 million.
Mr. Weingarten, in the course of questioning, got Mr. Houldsworth to admit he had lied to Australian investigators examining Gen Re's Australian affiliate.
Pressing his questions, Mr. Weingarten asked Mr. Houldsworth if it was not true that, before he entered a plea and turned government witness in 2005, he had initially maintained to investigators and said he did not know how AIG would enter the transaction on its books.
Mr. Houldsworth admitted that he had given false answers, specifically at a meeting in New York with a dozen lawyers present, including attorneys from the U.S. Justice Department, U.S Postal Service and Securities Exchange Commission
"So," Mr. Weingarten said, "you have the ability to look 12 people in the eye and tell them falsehoods?
"It would appear that way, yes," Mr. Houldsworth responded.
Last week, in direct testimony, Mr. Houldsworth testified 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."
Mr. Houldsworth, who has not yet been sentenced in the case, pleaded guilty in June 2005 to charges of criminal conspiracy to violate securities laws and agreed to testify against the others accused in the case. The charges against him carry a maximum up to five years in prison and a fine of up to $250,000.
His plea arrangement carries no specific promise of leniency, beyond the fact that prosecutors will make known to the court the extent of Mr. Houldsworth's cooperation in giving testimony about the scheme.
Mr. Houldsworth, an Irish citizen who lives in northern England, was a former auditor with Deloitte Touche.
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