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NEW HAVEN, Conn.Another former General Re Corp. executive has been indicted on criminal fraud charges as part of U.S. officials' probe into sham reinsurance deals allegedly struck between American International Group Inc. and Berkshire Hathaway Inc.'s Gen Re unit to help boost AIG's loss reserves in 2000 and 2001.
A federal grand jury handed down the superseding indictment Wednesday in a New Haven, Conn., U.S. district court, charging Christopher P. Garand--who served as senior vp and chief underwriter for Gen Re's finite reinsurance operations from 1994 to 2005--with a total of 10 counts of conspiracy, securities fraud, mail fraud, and making false statements to the Securities and Exchange Commission for his alleged role in the scheme.
Superseding indictments are issued when new charges or defendants are added to an indictment, or in the event certain charges or defendants are removed.
In addition to introducing Mr. Garand as a defendant, the new filing also brings added securities fraud and false statement charges against the four original defendants in the case, a spokesman for the U.S. Attorney's Office for the District of Connecticut said. It also removes certain mail and wire fraud charges, he said.
The original defendants--former Gen Re Chief Executive Officer Ronald E. Ferguson, former Gen Re Chief Financial Officer Elizabeth Monrad, Gen Re's former senior vp and assistant general counsel, Robert Graham, and Christian Milton, AIG's former vp of reinsurance--now face a total of 16 counts of conspiracy, securities fraud, mail fraud and making false statements to the SEC for their alleged participation in the scheme.
In a statement, Kevin J. O'Connor, U.S. attorney for the District of Connecticut, noted that "the Department of Justice and our federal law enforcement partners are committed to investigating and prosecuting corporate executives who intend to mislead investors, employees and customers by manipulating company financial information."
Messrs. Ferguson, Graham and Milton, as well as Ms. Monrad, in February pleaded not guilty to charges stemming from their alleged involvement in the reinsurance transactions. In April, they successfully sought to have their trials moved to Connecticut from Alexandria, Va.
Messrs. Ferguson and Graham and Ms. Monrad reside in Connecticut, while Messrs. Milton and Garand live in Pennsylvania and New Jersey, respectively.
Jury selection for the trial--which has been assigned to U.S. District Judge Peter C. Dorsey--is slated for March 1, 2007, a spokesman for the U.S. attorney's office said.
Messrs. Ferguson, Graham and Milton and Ms. Monrad each face up to 230 years in prison and $46 million in penalties if convicted of all charges outlined in the indictment.
Mr. Garand, meanwhile, faces a maximum term of 160 years in jail and a fine of up to $29.5 million.
According to Robert J. Cleary, Mr. Garand's attorney with the law firm of Proskauer Rose L.L.P. in New York, Mr. Garand plans to plead not guilty to the charges.
"The U.S. attorney's office has made a huge mistake," Mr. Cleary, said. "Mr. Garand has never committed any crime. He has a completely unblemished record and is a man of uncompromising integrity, and the highest moral and ethical standards. We look forward to our day in court, where we are confident Mr. Garand will be fully vindicated."
All five individuals also face an enforcement action by the SEC, which similarly alleges that the former executives--in concert with a number of other Gen Re and AIG executives--created two phony reinsurance contracts between the reinsurer's Cologne Re Dublin unit and a unit of AIG, which in the fourth quarter of 2000 and the first quarter of 2001 falsely increased AIG's loss reserves by $500 million.
New York-based AIG conceded last year that the deal at the center of the investigation, a retrocessional loss portfolio transaction, did not transfer sufficient risk and restated its results to account for it as a deposit rather than as reinsurance. The insurer later paid $1.64 billion to settle civil charges--including those related to the transaction--with the SEC, New York Attorney General Eliot Spitzer and New York Insurance Superintendent Howard Mills (BI, Feb. 20).
That settlement does not apply to AIG's former chairman and CEO, Maurice R. Greenberg, and former CFO, Howard I. Smith, who were also named in regulators' civil suit against AIG and have vowed to fight the charges in court.
Two other former Gen Re officials--John Houldsworth, former CEO of Cologne Re Dublin, and Richard Napier, a former senior vp--last year pleaded guilty to criminal conspiracy charges related to the investigation.