Danny Schechter - ColdType

98
ed on the White Collar crime blog maintained by law professors
:
February 25, 2008: Five former insurance company executives,
four from General Re Corporation (Gen Re) and one
from AIG, were convicted of conspiracy, securities fraud, false
statements to the SEC, and mail fraud in connection with a
“finite insurance” contract used to make AIG’s reserves look
stronger than they were. The defendants include the former
CEO of Gen Re, Robert Ferguson; the company’s former
CFO; senior vice president; and the long-time assistant general
counsel; in addition to a vice president from AIG. The
case revolved around reinsurance transactions in 2000 and
2001 that helped AIG report an increase in its insurance loss
reserves, something that analysis had been critical of, negatively
affecting the stock price. According to prosecutors,
the contracts were a sham transaction because no real risk
passed to Gen Re, so AIG’s accounting of it as a reinsurance
agreement was improper.
An interesting twist in the case was the government’s identification
of former AIG CEO Maurice Greenberg as an unindicted
co-conspirator. Greenberg has never been charged
with any crime.
Two years earlier on February 10, 2006, AIG “settled” federal
and state fraud claims: “American International Group Inc.
reached a global settlement with federal and state authorities,
including the civil suit filed by New York Attorney General
Eliot Spitzer, to resolve the various investigations of insurance
and securities fraud at the company. AIG’s total payment will
be $1.64 billion, comprised of the following: $700 million in
disgorgement and a $100 million penalty to the SEC; $375 million
to AIG policyholders; $344 million to states harmed by
AIG’s practices involving underreporting for workers’ compensation
funds; and, fines of $100 million to New York and $25
million to the U.S. Department of Justice.”