Ronald E. Ferguson the former chief executive of General Reinsurance and four codefendants, all convicted of securities fraud, committed crimes that qualify as high level offenses subject to stiff sentences, a judge ruled Friday.
U.S. District Court Judge Christopher Droney in Hartford, Conn. at the same time ruled Friday that the group will not have to pay restitution, that could have amounted to more than $500 million, because attempting to locate the thousands of investors would delay the sentencing process.
The other defendants convicted with Mr. Ferguson are 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).
Judge Droney's ruling on level of offenses is part of the process of applying federal sentencing guidelines.
His decision followed a Sept. 25 pre-sentence hearing at which the government argued evidence that the group's actions had caused stockholders a loss of between $543 million and $1.4 billion.
In February the five were convicted of a scheme to manipulate American International Group Financial Statements by creating a sham loss portfolio transfer reinsurance transaction designed to make AIG reserves look better.
Federal prosecutors had presented an expert Jeffrey Davis, vice president of Economics Incorporated, who produced varying estimates of the stock loss following revelations of the phony reinsurance deal. One calculation put it at $1.2 billion to $1.4 billion and another put it from $344 million to $598 million.
The high estimate "is not a reasonable estimate of the loss," the judge found. But, another calculation of $544 million to $597 million he did find reasonable and added thirty levels to each defendant's sentencing guideline calculation.
He also added another six levels offense levels to each defendant after a finding that the crime involved more than 250 victims and each had "suffered pecuniary harm in relation to their share of the mutual fund in which they were invested.
Defendants had presented expert Rene Stulz, director of the Dice Center for Research in Financial Economics, who said the amount of loss due to the fraud that could be calculated was zero.
Judge Droney gave both sides 21 days to submit additional material concerning the sentencing of the defendants.
According to U.S. Attorney's office, the statutory maximum sentence for Mr. Ferguson, Ms. Monrad, Mr. Graham, and Mr. Milton, is 210 years for 16 counts involving charges of conspiracy, securities fraud, mail fraud and false statements to the Securities & Exchange Commission. However, in reality these would be altered by sentencing guidelines.
For Mr. Garand, convicted of 10 counts the statutory maximum would be 150 years. However, under court sentencing guidelines statutory maximums are not applied.
A probation department report has recommended sentences ranging from 14 years to more than 17 years for each defendant.
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