Monday, May 4, 2009

Warren Buffett's Re-Insurance Lieutenants En Route to Prison: Ex-Gen Re Exec Gets Jail Time, $100K Fine In AIG Fraud Case

Also see: "Execs of Warren Buffett's Berkshire Hathaway, AIG Convicted of Conspiracy/Fraud Caused "Big Investor Loss" at AIG Unrelated to Mortgage Mess"
APRIL 30, 2009

A former General Re Corp. executive has been sentenced to a year and a day in jail and fined $100,000 for his role in a fraudulent scheme to manipulate American International Group Inc.'s (AIG) financial statements.

Robert D. Graham's sentencing is the last for the four former Gen Re officials found guilty in February 2008. Prosecutors accused the executives of inflating AIG's reserves by $500 million in 2000 and 2001 through fraudulent reinsurance deals that made AIG, Gen Re's largest client, look stronger than it was.

The other three officials received jail terms ranging from 18 months to four years. They included former Chief Executive Ronald Ferguson and ex-Chief Financial Officer Elizabeth Monrad. A fifth defendant, former AIG official Christian Milton, got the same year-and-a-day sentence as Graham.

Graham was convicted by a federal jury in Hartford of conspiracy, securities fraud, making false statements to the Securities and Exchange Commission and mail fraud.

Last October, a federal court found that AIG's shareholders lost between $544 million and $597 million as a result of the scheme. According to trial evidence, the fraud was carried out through the use of two sham transactions between units of AIG and Gen Re, in response to analysts' criticism of a $59 million decrease in AIG's loss reserves for the third quarter of 2000.

Gen Re is owned by Warren Buffett's Berkshire Hathaway Inc. (BRKA).

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