HARTFORD, CONN.–A federal prosecutor told jurors today that five insurance executives accused of a sham reinsurance transaction that artificially improved American International Group's financial picture all played a part in the deal and must be held accountable.
"Everyone had a role in this transaction. Each of them had a choice whether to do this or not. It was a risk they were willing to take, and they must now pay the consequences for it," said Assistant U.S. Attorney Eric Glover during closing arguments in U.S. District Court here.
One of the first defense lawyers up to rebut him said his defendant had done nothing wrong, and suggested a key government witness had made up his story.
The defendants face charges that include conspiracy, securities fraud, false statements to the SEC, wire fraud and mail fraud for activities in 2000 and 2001.
According to the government, a sham finite reinsurance transaction between AIG and General Re subsidiary Cologne Re Dublin was concocted by the group to artificially boost AIG loss reserves by $500 million in the last quarter of 2000 and first quarter of 2001.
On trial are Ronald Ferguson (former chief executive officer of Gen Re), Christopher Garand (a former Gen Re senior vice president), Robert Graham, (Gen Re'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).
Mr. Glover said it was clear from the evidence that the transaction was phony and had only one purpose–to allow AIG to create a false financial statement.
The prosecutor pointed to testimony from John Houldsworth, a former chief executive at Cologne Re Dublin, and Richard Napier, a former General Re senior vice president, both of whom have pleaded guilty to conspiracy in the case.
With the exception of Mr. Ferguson and Mr. Milton, the defendants were heard on Gen Re tape recordings discussing the particulars of the deal.
Mr. Glover also cited a variety of e-mails, including one in which Mr. Houldsworth wrote that the transaction was being processed "with the intention that no real risk is transferred."
Reid Weingarten, defense attorney for Ms. Monrad, said she was just doing her job as a trained accountant, had repeatedly sought further review of the transaction and had booked it properly for Gen Re. "She didn't imitate the deal, she didn't structure the deal," he said.
Of the two star witnesses, he said that overzealous prosecutors had "got them to concoct two stories that side deals existed and, voila, we have a criminal case."
He said records showed that at one of the points in Mr. Houldsworth's testimony, he was dining out with a group that had large amounts of beer and wine.
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