Five former insurance company executives, including the one-time CFO of General Re, were found guilty Monday of participating in a scheme to manipulate the financial statements of American International Group, the Associated Press reported.
Four of the defendants worked for General Re, the fifth for AIG. They all sat stone-faced as the verdict was read on the seventh day of deliberations in the month-long federal trial, according to the report.
The defendants Elizabeth Monrad, the ex-General Re CFO; Ronald Ferguson, the company’s former CEO; former senior vice presidents Christopher Garand and Robert Graham; and Christian Milton, AIG’s vice president of reinsurance until March 2005.
Each faces up to 230 years in prison and a fine of up to $46 million, except Garland, whose maximums are 160 and $29.5 million.
“This is a very sad day, not only for Ron Ferguson, but for our criminal justice system,” Clifford Schoenberg, Ferguson’s attorney, said in a statement, according to the AP.
The accounting-fraud case involved a phony reinsurance deal between General Re and American International Group to help boost the latter’s loss reserves by about $500 million in late 2000 and early 2001. Former AIG Chief Executive Maurice “Hank” Greenberg was an unindicted co-conspirator in the case, and allegations of accounting irregularities, including the General Re transactions, led to his resignation in 2005.
Warren Buffett, whose Berkshire Hathaway Inc. owns General Re, also was not charged.
As CFO magazine recently noted, former General Re senior vice president Richard Napier testified that Monrad said in a November 2000 conference call that AIG would have “a tough time getting the accounting they want out of the deal.” In that same phone call, she said “these deals are a little bit like morphine. It’s very hard to come off of them,” according to Napier.
Monrad’s attorney, Reid Weingarten, had argued that because Buffett had knowledge of the deal, Monrad didn’t think it was shady. “Buffett is an iconic figure,” he said at an October pretrial hearing. “He commanded enormous respect with Elizabeth Monrad. The evidence is beyond dispute that he knew about the transaction. He didn’t stop it. It is incredibly important to our defense that Elizabeth Monrad believed Buffet was on board.”
Monrad was CFO from 2000 to 2003.