Jury convicts five former insurance execs
A Connecticut jury found five former insurance company executives guilty of a scheme to manipulate the financial statements of the world's largest insurance company, American International Group Inc.
The defendants, four former executives of General Re Corp. and a former executive of AIG, sat stone-faced as they were convicted of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission.
Prosecutors said they participated in a scheme in which AIG paid Gen Re as part of a secret side agreement to take out reinsurance policies with AIG in 2000 and 2001, propping up its stock price and inflating reserves by $500 million.
"The case sends the message to executives that their decisions will be scrutinized ... and these types of offenses aren't just speeding tickets that you can pay," prosecutor Paul Pelletier told reporters after the verdict was read.
The verdict came in the seventh day of jury deliberations following a monthlong trial in federal court.
The defendants were former General Re CEO Ronald Ferguson; former General Re Senior Vice President Christopher P. Garand; former General Re Chief Financial Officer Elizabeth Monrad; and Robert Graham, a General Re senior vice president and assistant general counsel from about 1986 through October 2005.
Also charged was Christian Milton, AIG's vice president of reinsurance from about April 1982 until March 2005.
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.
Each declined to comment when they left the courtroom. They remained free on $1 million bond and are to be sentenced May 15.
"This is a very sad day, not only for Ron Ferguson, but for our criminal justice system," Clifford Schoenberg, Ferguson's personal attorney, said in a statement distributed at U.S. District Court in Hartford. "I and the rest of Ron's legal team will not rest until we see him -- and justice -- vindicated."
Garand's attorney, Anthony Pacheco, said he was disappointed by the verdict.
"Although this is a major hurdle, we will aggressively pursue all of Mr. Garand's rights on appeal," he said.
Milton's attorney, Frederick Hafetz, also vowed an appeal, saying that his client should have been tried separately from the other defendants.
Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.
Prosecutors said AIG gave Gen Re $10 million to pay the policy's premiums as part of a secret side agreement.
"You can't only not cook your own books, but you can't get into someone else's kitchen and help them cook their books," prosecutor Raymond Patricco Jr. said.
Prosecutors, who say the case that led to the charges is ongoing, have said AIG Chief Executive Maurice "Hank" Greenberg was an unindicted coconspirator in the case. Greenberg has not been charged and has denied any wrongdoing, but allegations of accounting irregularities, including the General Re transactions, led to his resignation in 2005.
In their closing statements, defense attorneys repeatedly invoked the name of widely admired billionaire investor Warren Buffett in arguing there was no wrongdoing and only a routine deal between AIG and Berkshire Hathaway Inc.'s Gen Re. Buffett heads Berkshire Hathaway.
Some of the defendants have said they believed Buffett was involved in the deal, but prosecutors and Buffett say that wasn't the case. Buffett has not been charged with any wrongdoing and did not testify at the trial.
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