Five former executives at the reinsurance unit of Berkshire Hathaway Inc. and insurer American International Group Inc. have been charged in a fraud probe of the two companies, the Securities and Exchange Commission and Justice Department announced.
The charges are related to a transaction between Berkshire's General Re unit and AIG in 2000 that investigators have said improperly inflated AIG's books by $500 million.
The indictment charges each of the individuals with 13 counts of conspiracy and fraud charges. The former executives face a maximum of 95 years in prison and $7.75 million in fines. Those charged were:
- Ronald Ferguson, 63, who was Gen Re's chief executive officer from 1987 through September 2001;
- Elizabeth Monrad, 51, who was Gen Re's chief financial officer from 2000 through July 2003;
- Christian Milton, 58, who was AIG's vice president of reinsurance from 1982 through March 2005; and,
- Robert Graham, 57, who was a Gen Re senior vice president and assistant general counsel from 1986 through October 2005.
The indictment charges that the defendants engaged in a scheme to make it look as though AIG increased its loss reserves. At issue are two sham reinsurance transactions between subsidiaries of AIG and Gen Re.According to the indictment, without the fake loss reserves added to AIG's balance sheet, the company's earnings releases for the last quarter of 2000 and the first quarter of 2001 would have shown greater reductions in loss reserves. In a restatement filed last year with the SEC, AIG reversed and restated the entries relating to these transactions.Another former Gen Re executive, Christopher Garand, was also named in the scheme, though not charged. Two former Gen Re executives pleaded guilty in June to roles in the transaction and are aiding the government's investigation.
