A former executive of reinsurer General Re Corp. was sentenced to two years probation and fined $10,000 after pleading guilty to helping American International Group cook its books.
U.S. District Judge Christopher Droney said his sentence of Richard Napier, who had served as senior vice president of General Re, a reinsurance unit of Warren Buffett’s Berkshire Hathaway Inc., took into account Napier’s extensive cooperation with prosectors.
Napier in 2005 pleaded guilty to a conspiracy charge that he agreed to deals between General Re and AIG, allowing the former insurance heavyweight to artificially inflate its profits.
“The words ‘I’m sorry’ really do not begin to capture my feelings,” Napier told the judge before receiving his sentence. “I wish there was a way to turn back the hands of time.”
Napier had faced up to five years in prison and a $250,000 fine for his action, though the judge said the sentence reflected the former executive’s extensive work with government investigators.
“Mr. Napier’s cooperation with the government … was of exceptional assistance,” Droney said. “His testimony showed the extent of the sham reinsurance conspiracy.”
Prosecutors cited Napier’s testimony as having helped convict four former General Re executives and one former AIG executive in February 2008.
The government had alleged that several AIG and General Re executives engineered a sham reinsurance transaction in 2000 that inflated AIG’s loss reserves by $500 million, without actually transferring risk.
Napier had been an account representative for the AIG account.
Former AIG Vice President Christian Milton was sentenced to four years in prison for his role in the scheme.
Former General Re Chief Executive Ronald Ferguson was sentenced to two years in prison, former General Re Chief Financial Officer Elizabeth Monrad to 18 months, and former General Re Senior Vice President Christopher Garand and Assistant General Counsel Robert Graham to one year each.
The government asked for a lesser sentence than what the sentencing guidelines allow, citing Napier’s “substantial and indeed extraordinary” help to prosecutors.
John Houldsworth, a former chief of a General Re subsidiary who also cooperated with prosecutors, was sentenced in June to two years’ probation and a $5,000 fine. General Re is based in Stamford, Connecticut, and AIG in New York.
The transaction at issue preceded by several years a series of federal bailouts totaling roughly $180 billion for AIG. It helped lead to the 2005 ouster of AIG’s longtime chief executive, Maurice “Hank” Greenberg.
AIG subsequently restated $3.9 billion of earnings for the 2000 to 2004 period, and agreed to a $1.64 billion regulatory settlement in 2006.
Buffett, who runs Berkshire, was interviewed by regulators about the reinsurance transaction, but was neither charged nor accused of wrongdoing.
The case is U.S. v. Napier, U.S. District Court, District of Connecticut (Hartford), No. 06-310.
(Reporting by Scott Malone in Hartford and Jonathan Stempel in New York; editing by John Wallace, Dave Zimmerman)
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