5 Execs Found Guilty of Fraud in Gen Re-AIG Trial

By Kenneth J. St. Onge | February 25, 2008

  • February 25, 2008 at 7:06 am
    the real truth says:
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    mr acevedo you must not know very much about the insurance business and it’s history, look up how historically aig has been in the forefront of un-ethical behavior for about the last 60 years

    all aig ever does is re-insurance scams sometimes some covert government work in a far off country and that is the reason that hank is teflon don, he has worked with the CIA for about 40 years, check this out you will see that i am right

  • February 25, 2008 at 7:56 am
    Pud says:
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    Now I hope all you Agents and people who criticized my writings get the point.If you think this is exclusive to AIG then you’re sadly mistaken.
    Insurance Companies are taking too much money in bonus’ from the public. Then they say they have to raise rates to cover loses.
    It’s big numbers game that has run amuck and every company not just insurance companies should be investigated for the same things.Maybe then our economy would be better because the money would MAYBE be passed on to the workers who are in the pit.
    That’s garbage!

  • February 25, 2008 at 8:24 am
    BAMMBAMM says:
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    If execs are making too much money, why aren’t their stockholders sueing them? If the companies are “raking in the dough” why not buy their stock? If they’re charging too much for insurance, why do their competitors not compete? And if they’re charging to much, why to buyers continue to buy?

  • February 25, 2008 at 3:42 am
    Bluemax says:
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    It seems when you have to perform each quarter for Wall Street you will go to extraordinary measures to satisfy at all costs. I think perhaps the street is responsible for as much bad behavior as it is for producing the godd it does. We will always see the bad overshadow the good in anything. I for one am glad I am not owing to those who would destroy me over a few cents of missed earnings.

  • February 25, 2008 at 3:46 am
    Tarheel says:
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    Amen to BlueMax. You speak the truth, brother.

  • February 25, 2008 at 3:50 am
    Dont Get It says:
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    I don’t get it. If the fraud was for AIG to inflate it’s reserves, why weren’t AIG execs (other than Milton) on trial? Where was there any benefit to Gen Re or any of the people who now face 260 years in jail?

  • February 25, 2008 at 3:54 am
    Mr. Obvious says:
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    And why was Greenberg an “unindicted co-conspirator” when it was his company that initiated the whole thing. Isn’t the captain supposed to be in charge of the ship? (And go down with it?)

  • February 25, 2008 at 3:59 am
    mark hester says:
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    I do not know the officers convicted… I hope it serves as a dererrant to those who may be in their position, in the future…

  • February 25, 2008 at 4:02 am
    Been Around Too Long says:
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    It’s getting “hot” in the Court Room. Four more high level Executives getting “fried” after discovery of their “creative accounting” practices, aimed at bolstering stock prices to further enrich Company Executives with stock options waiting to be exercised at top level prices. To hell with the little stockholder or those whose 401K money or mutual funds suffer as a result of the revelation of this accounting manipulation. The “big guys” who foster and promote this accounting chicanery belong behind bars more so than the street criminal that holds up little old ladies or snatches their purses. Those losses are peanuts compared to impact of a substantial hit to one’s 401K or individual stock portfolio. First the National Brokers and their bid-rigging schemes, now top Execs in AIG and Gen Re. Who is next? No wonder the public thinks the insurance business is run by a bunch of crooks. Add to this the All State Executives who thumb their nose and defy orders of the Florida Insurance Commissioner to produce evidence of their need for a giant rate increase. They have a damn good point. It ain’t over until the Fat Lady Sings, and from all signs, she’s hasn’t even sung her scales yet.

  • February 25, 2008 at 4:05 am
    Mrs Obvious says:
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    What will future officers be deterred from doing, exactly? Taking risks? Working with clients to find creative solutions? Thinking outside the box?

  • February 25, 2008 at 4:08 am
    Mrs Obvious says:
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    Been Around,

    Your post doesn’t make sense. The Gen Re people convicted here did not use “creative accounting.” In fact, they accounted for the deal quite conservatively calling it a deposit transaction. Only Milton was from AIG. The other four (plus the two that plead guilty and testified for the prosecution) were all on the Gen Re (Berkshire Hathaway) side of the transaction.

  • February 25, 2008 at 4:12 am
    John Sterling says:
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    Another nonsensical show trial. Why do D.A.’s prosecute cases like this?? Cuz they can, what a joke. These are real criminals???

  • February 25, 2008 at 4:13 am
    mark hester says:
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    A criminal is a crook, get them out of our business… A risk manager is a risk manager… let them manage risk, within the guidelines of the law… It’s really that simple…

  • February 25, 2008 at 4:20 am
    X INSURER says:
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    HERE IS A FEW FACTS. GEN RE IS PRIVATELY OWNED. NO EFFECT TO 401K’S DUE TO ANY OF THIS. AIG STOCK WAS UNAFFECTED AT THE TIME DUE TO THIS DEAL.THE RULES WERE WELL KNOWN AT THE TIME TO BE UNCLEAR. EVERYONE WHO EVER HEARD OF HANK WOULD KNOW THAT HE GOT HIS WAY OR ELSE. LOOK WHAT HE DID TO ERC WHEN THEY WOULDN’T PAY HIS CLAIMS. AIG WAS THE MARSH OF INSURERS. THE 800 POUND GORILLA YOU COULD NOT AVOID, WITHOUT THE 32 YEAR OLD ANALYSTS NAILING YOU TO THE WALL FOR LOOSING BUSINESS. THESE GUYS DO NOT DESERVE THIS. THEY ARE NOT ANYTHING LIKE THE CROOKS WHO BROUGHT DOWN COMPANIES OR THE THIEVES ON THE STREET. THINK ABOUT THE TWO GUYS AT MARSH WHO SET UP BID RIGGING AND TOOK MONEY FROM BOTH THEIR INSUREDS AND THE INSURERS VERSUS THIS CASE.THE AIG/GEN RE CASE COULD HARDLY HOLD A CANDLE TO SUCH THIEVERY.

  • February 25, 2008 at 4:25 am
    Ahem says:
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    They are all crooks of one sort or another. Granted, their errors don’t rise to the level of the Enron execs but innocent they are not. Hank must be Mr. Teflon.

  • February 25, 2008 at 4:25 am
    fed up says:
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    Investors take risks, risks based on reliance upon individuals to perform in ways they would hope or expect. One risk investors take on, plain and simple, is the risks of executives lying.

    These executives never engaged in practices that were illegal at the time, or even considered to be illegal. Misleading, perhaps. But are you trying to tell me that McDonald’s executives aren’t misleading the public on the health of their food? Or Ford misleading people on the quality of their vehicles?

    My point is, it happens all around us, and sorting out lies from truth is part of life.

    Ruining the lives of executives, because you are either jealous of their success, ungrateful for what they have provided for society, or trying to advance your own political career, should be considered the real wrongdoing.

    I hope they appeal and win and that you all realize ex post facto rulings are not in anyone’s best interest, except those who love dictatorships.

    Take on your own d*mn responsibility for your investments.

  • February 25, 2008 at 4:44 am
    Manuel Acevedo says:
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    It is amazing to see executives of a large and reputable company manipulate books in order to boost stocks and mislead the public. Shame on them and those involved in transactions like this.

    Manny

  • February 25, 2008 at 5:01 am
    underbroker4 says:
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    The position taken by the defendants is simply put, not defensible. I feel badly they will have to do some time. That having been said, does not make the action any less wrong.

    We are all much better served to refrain from defending actions that are detrimental to the industry.

  • February 25, 2008 at 5:05 am
    No Problem? says:
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    So, what kind of standard of ethics are we the people living by now? Are we that desensitized in believing “it’s okay, it’s just part of the job”?

  • February 25, 2008 at 5:37 am
    Cynthia Marcotte Stamer says:
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    Today’s announcement of the AIG convictions on securities laws violations and the Marsh convictions on big rigging clearly document the critical importance for insurance organizations and their leaders to adopt and follow appropriate compliance and internal controls processes to maintain the legally required and operationally indispensible culture of ethics.

  • February 25, 2008 at 5:52 am
    Mike says:
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    The problem here is that the AIG-Gen Re insurance transaction did not pass the smell test. The sad part of this is that Gen Re could have accommodated AIG’s request with a legitimate–if low risk–transaction involving essentially a transfer of mature reserves. The lesson for all insurance execs is this: even when the request comes from a valued and powerful client, BE SURE the transaction you set up will withstand scrutiny as having a business purpose, the documentation reflects the facts, and the fees/premiums/income earned are consistent with the structure of the transaction.

  • February 25, 2008 at 5:59 am
    BAMMBAMM says:
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    I have no idea why they went after Milton. He’s head of ceded reinsurance at AIG, but there was nothing in it for him. He just did what he was told. He used to teach nights at The College of Insurance for goodness sakes. He’s not a “bigwig”; he’s a workaday guy.

  • February 25, 2008 at 6:22 am
    Mr Ethics says:
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    to BamBam

    “just doing what you are told” is not, and should not, be a get out of jail free card. If you are told to do something that is illegal or something you believe to be unethical, you owe it to yourself, your profession and to society in general to say NO.

  • February 25, 2008 at 6:30 am
    Sebastian says:
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    While this entire situation is so misfortunate because the Gen Re execs did not need this involvement with AIG, the government has failed to appropriately recognize the role of CEO micro manager, Joe Brandon, in this entire transaction. Nothing gets done at GRC, esp. a $500MM deal, unless Brandon signs off on it.

  • February 25, 2008 at 6:34 am
    BAMMBAMM says:
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    What if you have no freakin idea? (I wouldn ‘t expect any mercy from you at this point though – you’ve already defined yourself as a righteous scumbag.)

  • February 26, 2008 at 7:42 am
    Nobody Important says:
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    I wonder if these are some of the ‘A’ students we need in our industry just thinking outside the box. Hopefully, they will do some thinking while inside the box.

  • February 26, 2008 at 7:47 am
    cupojoe says:
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    Excellent point… the average “C” student is not schmart enuf to think of a scam like dis. We need more “C” students running the insurance bizness!

  • February 26, 2008 at 8:05 am
    Nobody Important says:
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    A lot of the really really bright people are just bored by our business. They need to find ways to make it more interesting. Us ‘C’ students aren’t bored, just boring.

  • February 26, 2008 at 8:10 am
    John Gault says:
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    Now we know why Michael was escorted out.

  • February 26, 2008 at 8:29 am
    GT says:
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    Is this just the TIP OF THE ICEBURG?

  • February 26, 2008 at 8:40 am
    dot_hemath says:
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    You wanna run that one by me, John? What NCCI case? Who’s Michael? What’s the connection to this case?

  • February 26, 2008 at 8:55 am
    Pud says:
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    No YOU miss the point! I know that this is how the corporate world runs but I;m telling you if it doesn’t change this country is headed for disaster to be competitive in the world market.
    We might as well all wrok at McDonalds or some service sector petty job.

    I guess there is just no convincing people like you.You must be one of the forutnate that screw the general public.

    Judgement day will come for each one of us.

  • February 26, 2008 at 8:56 am
    Pud says:
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    That BS you’d be cruscified!

  • February 26, 2008 at 10:25 am
    Nobody Important says:
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    It sure is GT, there are a lot of political careers to be made.

  • February 26, 2008 at 10:45 am
    former reinsurer says:
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    tip of the Greenberg, I would have thought…………

    But the whole criminal prosecution dimension of this smells, almost as badly as the business conduct of the Gen Re people. The reporting obligation is AIG’s alone–that’s why AIG’s officers sign the filed statements–and law was broken when those statements were filed. While Gen Re might arguably have had civil-liability or reputational exposure for this deal, it’s way too far a stretch to convict them of criminal wrong-doing. Prosecutors relied on the limited insurance-accounting understanding of the jury and upon inflammatory–indeed, histrionic–characterizations (e.g., “sham transactions” for funds-held arrangements).

  • February 26, 2008 at 11:12 am
    Pud says:
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    I beieve hard work and results should be rewarded but c’mon.

    I think bonus’ are excessive.NOT JUST INSURANCE COMPANIES.
    (BIG TIME!)

    Many insurance companies are not making money from what has been posted in the forum unless they increase rates continually.They can’t afford to pay out in high risk areas but they can sure put money in the big sheese pockets.

    The only reason I purchase insurance is because it’s mandated by law!

    I just as well take my chances rather than pay premiums,the way it was years ago before government and insurance coerced.

  • February 26, 2008 at 12:03 pm
    Norm Nunnally says:
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    Wow, You must be a carpenter! You really hit the nail on the head. I agree with you 100%, we have allowed our values to be too easily swayed by PC’ness. Regretfully we have individuals amongst our ranks that to often seek the easy path, they exhibit the human flaw in the old equation of: (ethics+experience+values=Character).

  • February 26, 2008 at 12:53 pm
    Mrs Obvious says:
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    Former Reinsurer
    That’s my point. Gen Re did a transaction and accounted for it correctly. AIG may have (by their own corporate admission) accounted for it incorrectly. But the individuals punished are not the folks from AIG who misrepresented the transaction.

    I wonder how the outcome of the trial would have been different if the jury of their peers consisted only of insurance/finance executives who could understand what actually happened rather than what the prosecutors made it out to be.

  • February 26, 2008 at 1:38 am
    Titanic watcher says:
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    I think it is just the begining. More canaries (generally honest people forced out of their jobs from ‘interesting firms’ or made to play hardball / document everything as the ever ‘A+’ student type to hold on to their ride)will begin singing in the months to come and many guilty parties will talk to save their sorry ‘C’ grade but bullying asses. There is nothing new under the sun here folks. It is always the same. The law is very patient and meticulous in going about their objectives. Each judgment is but part of a greater strategy. Once the wheels are in motion, you really cannot stop the process. Maybe I am wrong, but we will see. The titanic was not very nimble, but it was a heavy damn thing and there was no stopping its impact too. The more press we see and the more stuff comes up, the more this will all drive the process to its inevitable end. For the many honest insurance co. and broker employees, you will have your day…

  • February 26, 2008 at 1:48 am
    Jesse says:
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    I can see you were not an English major. Lying and misleading are one of the same. Moreover, this has nothing to do with investments but about no telling the truth. What’s up with McDonald’s?

  • February 26, 2008 at 2:38 am
    timaeus says:
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    Brandon was not CEO when this went down, Ferguson was.

  • February 26, 2008 at 2:39 am
    timaeus says:
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    Exactly, if this was a civil case, it would be dismissed, no harm, no foul.

  • February 26, 2008 at 6:44 am
    Jake says:
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    Pud,

    Your take is very anti-economic. Do you really think that there should be no incentive for a CEO to have his/her company perform well?

  • February 26, 2008 at 6:54 am
    BAMMBAMM says:
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    Tell us more – why was Brandon not indicted? Or was he one of the stool pigeons?

  • March 23, 2008 at 12:17 pm
    grixepipleree says:
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  • April 12, 2008 at 7:00 am
    John Peters says:
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    They were convicted and should do time in jail if their appeals are unsuccessful. The focus on white collar crime should be the word CRIME.

  • April 12, 2008 at 7:10 am
    BAM says:
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    “They were convicted and should do time in jail….”

    Thanks for the fresh thoughts. A jury couldn’t possibly have understood the transaction, and we now have an alleged crime ramrodded by a criminally corrupt prosecutor. Things could change.



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