Former AIG, General Re Execs Admit to Reinsurance Fraud, Pay Fines

Five former executives of American International Group Inc. and Berkshire Hathaway Inc. unit General Reinsurance admitted to conducting a fraudulent reinsurance transaction on Friday as part of a deal to end a years-long criminal case against them.

All five entered into deferred prosecution agreements, meaning their indictments will be dismissed in a year if they stay out of trouble. They also agreed to fines ranging from $100,000 to $250,000.

The deal brings to an end a high-profile case that has worked its way through the courts since May 2006.

In 2008, former Gen Re Chief Executive Ronald Ferguson, Chief Financial Officer Elizabeth Monrad, Senior Vice President Christopher Garand and Assistant General Counsel Robert Graham, as well as AIG Vice President Christian Milton, were convicted of engineering a reinsurance deal to fraudulently boost AIG’s reserves.

In August 2011, a federal appeals court threw out the convictions and ordered a new trial, citing errors by the judge in the case. The five had been sentenced to anywhere from one to four years in prison, though they were all out on bail, pending their appeals.

Last February, a new judge overseeing the case set a January 2013 date for their retrial.

As part of the deal, all five agreed to recognize “that aspects of the (reinsurance) transaction were fraudulent,” that there were signs it would be improperly accounted for and that they each should have taken steps to stop it.

In the court filings, the government said it had taken into consideration the cost of a retrial and the fact that the conduct at issue happened more than 12 years ago, when deciding to enter into the agreements.

The case is U.S. vs. Ferguson et al, U.S. District Court, District of Connecticut, No. 06-00137

Topics Fraud Reinsurance AIG