Ignoring a government request that he serve significant time, a federal judge today sentenced former General Re. Corp. chief executive officer Ronald E. Ferguson to two years in prison for securities fraud involving a sham reinsurance transaction.
U.S. District Court Judge Christopher F. Droney in Hartford, Conn., also imposed a $200,000 fine and two years of supervised release on the 66-year-old executive.
Mr. Ferguson was ordered to report to a Bureau of Prisons facility on Feb. 18, 2009, if he is unsuccessful in arguments at a prior court hearing that he should remain free on bond pending his appeal of conviction to the 2nd Circuit U.S. Court of Appeals.
He was convicted in February with four other executives of a complicated reinsurance deal with a hidden side agreement that permitted American International Group to inflate its financial picture.
The other defendants convicted with Mr. Ferguson–who remain to be sentenced–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).
Last month, Judge Droney found that the scheme cost shareholders more than $500 million. The government said the amount was up to $1.4 billion.
The judge ruled that the defendants did not have to pay restitution, because attempting to locate the thousands of investors would delay the sentencing process.
In reaction to the sentence, Nora R. Dannehy, acting Connecticut U.S. attorney, said that "while the government believes that a longer term of imprisonment was justified, the message is clear: Those who seek to deceive investors by fraudulently manipulating corporate balance sheets face the very real possibility of a felony conviction and time in prison."
The prosecution was jointly handled by her office, the U.S. Attorney's Office for the Eastern District of Virginia, and the Fraud Section of the U.S. Department of Justice.
According to the Associated Press, Mr. Ferguson's attorney's said the former insurance leader had plans to become an ordained minister, and quoted the judge as calling the case a "tragedy," remarking: "We will never know why such a good man did such a bad thing."
In addition to securities fraud, Mr. Ferguson was convicted of conspiracy, mail fraud and making false statements to the Securities and Exchange Commission.
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