Posted on 24 Aug 2009
Former Gen Re senior vice president Richard Napier, who is the last former executive facing charges relating to a sham finite reinsurance transaction involving Berkshire Hathaway's General Reinsurance Corp. and American International Group Inc., is scheduled for sentencing on September 15, according to Thomas Carson, a spokesperson for the U.S. Attorney's Office.
Napier testified for the government that the defendants structured the transaction to avoid detection by auditors and regulators.
Six other executives have already been sentenced in connection with the case following a month-long trial on charges that included conspiracy, securities fraud, making false statements to the U.S. Securities and Exchange Commission and mail fraud.
The transaction involved a loss portfolio transfer that prosecutors said allowed AIG to book $500 million of loss reserves in the fourth quarter of 2000 and first quarter of 2001 without assuming any real risk. Gen Re allegedly paid a $10 million premium that AIG secretly returned through a side deal, prosecutors said. The two government witnesses -- Napier and John Houldsworth, the former chief executive officer of Berkshire Hathaway's General Re affiliate Cologne Re Dublin -- testified that the defendants structured the transaction to avoid detection by auditors and regulators (BestWire, Feb. 25, 2008).
In June, Houldsworth was sentenced in federal court to serve two years of probation for his role in the sham finite reinsurance deal. He was also fined $5,000, and was ordered to perform 400 hours of community service (BestWire, June 16, 2009).
Five other former executives, four from Gen Re and one from AIG, were sentenced to serve jail time in connection with the case. Those executives are:
• Ronald Ferguson, former Gen Re CEO, who was sentenced to two years in prison plus an additional two years supervised release and a $200,000 fine;
• Christian Milton, former AIG vice president of reinsurance, who was sentenced to four years in jail and a $200,000 fine;
• Elizabeth Monrad, former Gen Re chief financial officer, who was sentenced to 18 months in prison plus an additional three years of supervised release and a $250,000 fine;
• Christopher Garand, former Gen Re head of finite reinsurance operations in the United States, who was sentenced to a year and one day in prison and a $150,000 fine; and
• Robert Graham, former assistant general counsel at Gen Re, who was sentenced to one year and one day in prison plus an additional two years supervised release and a $100,000 fine.
General Reinsurance Corp., a member of the Berkshire Hathaway Insurance Group, currently has a Best's Financial Strength Rating of A++ (Superior). Cologne Reinsurance Co.(Dublin), also a member of Berkshire Hathaway, is currently in run-off, but has a Best's Financial Strength Rating of A- (Excellent). AIG Commercial Lines Group's Best's Financial Strength Rating of A (Excellent) currently has a negative outlook.