Posted on 03 Feb 2009
According to the U.S. Securities and Exchange Commission, former RenaissanceRe Holdings Ltd. Chairman and Chief Executive Officer James N. Stanard has received a $100,0000 civil fine for his alleged role in a two-part sham reinsurance deal with Inter-Ocean Reinsurance Co. Ltd. in 2001.
In 2006, Mr. Stanard and two other former RenaissanceRe officials, former Controller Martin Merritt and former Senior VP Michael Cash, were charged by the SEC with orchestrating the deal with Inter-Ocean Reinsurance Co. Ltd., a finite-risk reinsurer now in runoff.
The SEC's complaint said the effect of that transaction was to smooth and defer $26.2 million of Pembroke, Bermuda-based RenaissanceRe's income from 2001 to 2002 and in 2003.
The SEC announced Friday that Judge Gerald E. Lynch of the federal district court in New York issued his opinion and order Jan. 27 after a six-day bench trial in September.
In ruling in favor of the SEC, Judge Lynch said: "Even if Stanard did not decide, in so many words, 'I want to do something fraudulent,' the SEC has demonstrated that Stanard was, at the least, highly reckless with respect to the Inter-Ocean transaction."
The SEC has demonstrated "by a substantial preponderance of the evidence," that Mr. Stanard wanted to engage in a transaction that was "without economic reality," said the opinion.
The court found that Mr. Stanard violated federal securities laws. His sentence permanently enjoins him from violating or aiding or abetting violations of their provisions, in addition to imposing the $100,000 penalty.
But the court denied the SEC's request that Mr. Stanard, who resigned from RenaissanceRe in 2005, be barred from serving as an officer or director of a publicly held company, stating the SEC has not shown that he "obtained any ill-gotten gains or unjust enrichment as a result of the fraudulent accounting." It directed the SEC to submit an "appropriate final judgment" by Feb. 17, according to the SEC statement.
Mr. Stanard's attorney, James D. Mathias, of DLA Piper US L.L.P. in Baltimore, said that while Mr. Stanard did not receive the "total vindication" he sought, he was pleased the judge did not order him barred from serving as an officer or director. Mr. Mathias also said "many of the findings of the court were supportive" in terms of the "moderate" penalty levied and in saying Mr. Stanard had no personal motive "to do anything wrong."
"At this point, we're still considering all our alternatives," Mr. Mathias said when asked about an appeal.