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Gen Re to Pay More than $60M to Settle AIG Fraud Investigation

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Posted on 20 Jan 2010

Reinsurer General Re Corp., owned by Warren Buffett's Berkshire Hathaway Inc., has agreed to pay more than $60 million, ending U.S. investigation its role in a sham transaction that defrauded American International Group Inc. (AIG) investors, according to those familiar.

The agreement includes a $19.5 million payment and forfeiture of $12.2 million in alleged profit, said the people, who declined to comment because the talks aren’t public. They said much of the full obligation will be covered by a related settlement with AIG investors that was previously disclosed.

The deal, possibly to be announced today, lets Gen Re avoid prosecution by the Justice Department and resolves civil claims by the Securities and Exchange Commission, the people said.

The U.S. inquiry focused on a 2000 transaction that prosecutors said helped AIG overstate reserves. The case led to convictions of four former Gen Re executives, including ex-Chief Executive Officer Ronald Ferguson, 68, and one from AIG. The fraud cost AIG shareholders from $544 million to $597 million, a federal judge in Hartford, Connecticut, found. Two other Gen Re executives pleaded guilty.

SEC spokesman John Nester and Justice Department spokesman Laura Sweeney declined to comment. An attorney representing Gen Re didn’t immediately return a call seeking comment after regular business hours yesterday.

Gen Re was cooperating with government investigators, Berkshire Hathaway said in a Nov. 6 regulatory filing.


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