Former AIG, General Re Officials Convicted of Fraud
Tuesday, February 26, 2008
Four former executives of General Reinsurance and a former American International Group executive were convicted of fraud yesterday for helping to deceive AIG investors through a sham transaction in 2000.
Ronald Ferguson, a former General Re chief executive, and Elizabeth Monrad, a former chief financial officer, were among those found guilty in federal court in Hartford, Conn.. Prosecutors said they helped AIG fraudulently add $500 million in loss reserves, a key indicator of an insurer's health.
"This case is about truth, a choice to lie and deception to cover it up," Assistant U.S. Attorney Raymond Patricco said in closing arguments. "These five defendants made the choice to lie to AIG's investors and to deprive them of the opportunity to make informed decisions about their stock."
Jurors deliberated six days and convicted each defendant of all charges, including conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission.
The defendants face a maximum of 20 years in prison on the most serious charges, but advisory guidelines typically call for shorter terms. Sentencing is set for May 15. Each defendant is free on $1 million bond.
Prosecutors said Ferguson and his subordinates set up a phony reinsurance deal after Maurice R. "Hank" Greenberg, the former chief executive of AIG, sought to assuage investors about the reserves.
The trial featured testimony about Greenberg and billionaire Warren Buffett, chairman of Berkshire Hathaway, the Omaha holding company that owns General Re. Neither was charged with a crime, and both denied wrongdoing.
Ferguson, 66, and Monrad, 53, were convicted with Christopher Garand, 60, a former General Re senior vice president; former General Re assistant general counsel Robert Graham, 59; and Christian Milton, 60, AIG's former head of reinsurance. Lawyers for Ferguson, Garand and Milton said they would appeal. Monrad's lawyer, Reid Weingarten, had no immediate comment.
"This is a very sad day, not only for Ronald Ferguson, but for our criminal justice system," Ferguson's lawyer Cliff Schoenberg said in a statement. He said he hopes Droney or an appeals court "will reverse this grave miscarriage of justice."
Schoenberg said the reinsurance industry may have been too complicated for jurors to understand. Milton's attorney Frederick Hafetz said "there is a substantial basis for appeal dealing with the fairness of a multi-defendant trial."