HARTFORD, CONN.–The former chief executive of General Reinsurance, on trial here for conspiracy and securities fraud, had no motive to ruin a spotless career by involvement in a sham transaction, his lawyer told a jury today.
Attorney Michael Horowitz–representing Ronald Ferguson, the former head of Gen Re, a Berkshire Hathaway unit–made his remarks here in U.S. District Court in the second day of defense summations at the trial of five insurance executives.
The group is accused of conspiring to create a sham finite reinsurance transaction that helped artificially improve the financial picture of American International Group in the fourth quarter of 2000 and first quarter of 2001.
In addition to Mr. Ferguson, those on trial include 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. Horowitz told the jury that the case was the result of "an honest mistake" by an AIG actuary concerning the statutory rules for the kind of risk transfer the deal involved, and led AIG to book the transaction erroneously.
He said that his client, when the transaction was arranged, was in the process of wrapping up a 30-year career, and it made no sense for him to have put his personal and professional reputation at risk.
"There's only one just conclusion you can come to in this case–that Ron Ferguson, a good and decent person, is not guilty in this case," he advised the jury.
Mr. Horowitz and other defense lawyers throughout their arguments attacked the credibility of the government's two key witnesses–Richard Napier, a former Gen Re senior vice president, and John Houldsworth, a former chief executive at Cologne Re Dublin, a Gen Re subsidiary involved in the deal. Both pled guilty to reduced charges arising from the case.
Mr. Horowitz argued that it was Warren Buffet, chairman of Gen Re parent Berkshire Hathaway, who had arranged that the fee for the deal was $5 million. Mr. Buffet has not been charged in the case, and he has said he was not involved with the main points of the deal. He was listed but not called as a prosecution witness.
Alan Vinegrad, representing Mr. Graham, said his client was merely doing the duties of a staff lawyer acting in good faith on behalf of his company.
He blamed Mr. Houldsworth for misleading Mr. Graham into believing the deal was legitimate, and noted that Mr. Houldsworth had admitted on the stand that he had lied to Australian investigators examining a case involving Gen Re's Australian affiliate, and had initially lied to prosecutors when they began investigating the AIG deal.
Mr. Vinegrad said Mr. Graham had raised questions about the AIG transaction, but his boss–Gen Re General Counsel Timothy McCaffry, an unindicted coconspirator in the case–had never told him to stop work on the contract.
"Rob Graham isn't a criminal. He didn't act like one, because he isn't one," said Mr. Vinegrad.
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