Ignoring a government request that he serve more significant time, a federal judge last week sentenced Ronald E. Ferguson, former chief executive of General Reinsurance Corp., to two years in prison for securities fraud involving a sham finite reinsurance transaction to benefit American International Group.
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 former CEO.
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 finite reinsurance deal with a hidden side agreement that permitted AIG to artificially inflate its financial position.
The other defendants convicted with Mr. Ferguson–who remain to be sentenced–are:
o Christopher Garand–a former Gen Re senior vice president.
o Robert Graham–Gen Re's former senior vice president and counsel.
o Elizabeth Monrad–Gen Re's former chief financial officer.
o Christian Milton–a former AIG vice president for reinsurance.
Last month, Judge Droney found that the scam 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 attorneys said the former insurance leader had plans to become an ordained minister, and quoted the judge as calling the case a “tragedy,” remarking that “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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