Former General Re executives, including ex-chief executive Ronald Ferguson, and American International Group's former reinsurance buyer, have been charged with fraud by both the U.S. Department of Justice and the Securities and Exchange Commission. The charges relate to a deal between AIG and General Re that increased AIG's reserves by $500 million, and cost former AIG chief executive Hank Greenberg his job last year.
The Department of Justice has indicted Ferguson, who led General Re between 1987 and 2001; Elizabeth Monrad, its former CFO; Robert Graham, who was senior v.p. and assistant general counsel at General Re; and Christian Milton, former v.p. of reinsurance at AIG. If convicted of all these charges, the defendants each face a maximum of 95 years in prison and more than $7 million in fines.
"This indictment sends a clear message to corporate America that executives will be brought to justice not only for cooking their own company's books, but also for knowingly helping their counterparts at other companies do the same," said Acting Deputy Attorney General McNulty, who chairs the corporate fraud task force.
The SEC has also charged these four, plus Christopher Garand, a former General Re senior v.p. who was head and chief underwriter of Gen Re's U.S. finite reinsurance operations until August 1995.
The Department of Justice and the SEC claim that the defendants and others helped AIG to structure two transactions that falsely increased AIG's loss reserves by $500 million in the fourth quarter of 2000 and the first quarter of 2001. The complaint alleges this was done to quell criticism from stock analysts about a reduction in AIG's loss reserves in the third quarter of 2000.
"The complaint charges that the defendants understood from the beginning that they were structuring a sham transaction involving the creation of phoney documents for the purpose of providing apparent support for false accounting entries AIG made on its books," the SEC said in a statement.