NEW YORK—Lawyers for former executives of General Re Corp. and American International Group Inc. argued in court Wednesday that their clients didn't get a fair trial when they were convicted in 2008 in connection with a bogus loss portfolio reinsurance deal.

During a hearing Wednesday before the 2nd U.S. Circuit Court of Appeals, attorneys for the former executives criticized the evidence used against the executives, among other arguments, in seeking to have the convictions overturned.

Convicted in the case were Ronald E. Ferguson, former Gen Re CEO; Christopher P. Garand, former senior vp in charge of U.S. finite underwriting for Gen Re; Robert Graham, former senior vp and legal counsel for the reinsurer; Elizabeth Monrad, Gen Re's former chief financial officer; and Christian M. Milton, AIG's former vp for reinsurance.

In the case, prosecutors had alleged that the executives engineered a bogus loss portfolio reinsurance transaction that helped AIG inflate its loss reserves by $500 million in 2000 and 2001. The deal, aimed at countering stock analyst concerns about AIG's reserve levels, transferred no risk to AIG and featured an unwritten side agreement that AIG would refund Gen Re's $10 million premium and pay it a $5 million fee, the government alleged.

Defense lawyers had argued that there was no such side agreement, that the defendants believed the deal to be a legitimate finite risk transaction and that they were misled about the degree of risk in the portfolio by others.

In March 2008, a jury found the executives guilty of various counts, including conspiracy, fraud and making false statements to the Securities and Exchange Commission. All received varying prison sentences and fines but have been free on bail pending their appeals.

During Wednesday's hearing, Mr. Ferguson's lawyer, Paul A. Engelmayer of Wilmer Cutler Pickering Hale & Dorr L.L.P., said that jurors didn't have enough information to find Mr. Ferguson guilty beyond a reasonable doubt. The prosecution countered that its evidence had shown that Mr. Ferguson agreed to a secret side deal.

In addition, the defendants' lawyers debated whether the court should have admitted evidence of the decline of AIG's stock price as proof that the deal was significant enough that AIG had a legal obligation to inform its investors. In particular, they noted an assumed connection between the disclosures of the deal and the stock price decline that took place around the same time. Prosecutors noted in response that the defendants had chosen not to challenge that assumption through cross-examination of witnesses, although they could have done so during the trial.

Other arguments included a protestation about the use of tape recordings to convey to the jury that AIG routinely engaged in accounting fraud. As the sole AIG defendant, such evidence portrayed Mr. Milton as guilty by association and prejudiced the jury against him, his lawyers argued.

After hearing oral arguments, the appeals court took the matter under advisement and will issue a ruling at later date.

For full coverage of the Gen Re/AIG finite trial, click here.