Jurors to Begin Deliberations on Gen Re-AIG Reinsurance Case This Week

February 11, 2008

After a month of testimony, jurors in Hartford are expected to begin deliberating this week over the fate of former executives of General Re Corp., a reinsurance company owned by Berkshire Hathaway, without hearing from its chief, billionaire investor Warren Buffett.

Defense attorneys for four former executives of General Re and a former executive of American International Group Inc. rested their case last Thursday after calling five witnesses over two days.

Prosecutors had rested their case Wednesday after calling witnesses for nearly a month, trying to prove the executives participated in a reinsurance scheme to manipulate AIG’s financial statements.

Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

In court papers filed before the trial, prosecutors listed Buffett, who is chairman an chief executive of Berkshire Hathaway, as a prospective witness and said they would call him to rebut defense witnesses who implied that he supported the deal that led to charges.

That testimony never emerged. Defendants Elizabeth Monrad, former Gen Re chief financial officer, and Robert Graham, a former General Re senior vice president and assistant general counsel, called five character witnesses between them.

The other three defendants — former Gen Re CEO Michael Ferguson, former General Re Senior Vice President Christopher P. Garand, and Christian Milton, AIG’s former vice president of reinsurance — did not call any witnesses.

A message was left with Buffett’s attorney seeking comment.

The case could go to the jury this Wednesday.

Federal authorities say the defendants participated in a scheme to quell criticism by analysts of a reduction in AIG’s loss reserves in the third quarter of 2000. The indictment alleges that the aim was to make it appear that AIG increased its loss reserves by about $500 million in 2000 and 2001, pacifying the analysts and investors and artificially boosting the company’s stock price.

Buffett has not been charged with any wrongdoing and has said he was not briefed on how the transactions in question were to be structured or on any improper use or purpose of the transactions.

U.S. postal inspector James Tendick, a prosecution witness who reviewed thousands of e-mails, bank statements and letters as part of the government’s case, testified this week that Ferguson e-mailed Buffett about one of the transactions in 2000. Ferguson told Buffett that former AIG CEO Maurice “Hank” Greenberg was eager for the reinsurance deal between the two companies to go forward, Tendick testified.

Greenberg has not been charged in the case and has denied any wrongdoing, but allegations of accounting irregularities, including the General Re transactions, led to his resignation in 2005.

If convicted of all the charges, Ferguson, Monrad, Milton and Graham each face up to 230 years in prison and a fine of up to $46 million. Garand faces up to 160 years in prison and a fine of up to $29.5 million.


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