Gen Re Agrees to $72 Million Settlement in Finite Reinsuranc
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February 26, 2009 Thursday 03:58 PM EST
489 words
Gen Re Agrees to $72 Million Settlement in Finite Reinsurance Civil Case
Alyn Ackermann
COLUMBUS, Ohio
General Reinsurance Corp. has agreed to pay $72 million to settle claims stemming from the reinsurance transaction that led to four or its executives and one from American International Group Inc. being found guilty of federal fraud charges.
The settlement is part of litigation against AIG (NYSE: AIG) brought by Ohio on behalf of the state's public pension funds, claiming that the $500 million finite reinsurance deal allowed AIG to inflate its loss reserves and deceive investors about its financial condition, Ohio Attorney General Richard Cordray said in a statement.
"When the truth about this fraud and other AIG manipulations was made public, the price of AIG stock declined," Cordray said. "Investors, including Ohio's pension funds, had been deceived and suffered significant financial losses."
The settlement must be approved by the United States District Court for the Southern District of New York in Manhattan, Cordray said.
The Ohio Attorney General's Office is litigating the case on behalf of the Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police and Fire Pension Fund, and seeks damages for investors who purchased AIG securities between Oct. 28, 1999, and April 1, 2005.
Cordray said that in October 2008 his office entered into a $97.5 million settlement with PricewaterhouseCoopersLLP as part of the AIG case. PricewaterhouseCoopers was alleged to have violated securities laws by providing auditing services and unqualified audit opinions on AIG's financial statements during the years at issue in the case.
The state's suit against AIG remains open.
Efforts to obtain comment from AIG were not immediately successful.
The four Gen Re executives convicted a year ago in the case, on charges of conspiracy, securities fraud, making false statements to the U.S. Securities and Exchange Commission and mail fraud, were: former chief executive Ronald Ferguson; former assistant general counsel Robert Graham; former chief financial officer Elizabeth Monrad; and former Gen Re senior vice president and chief underwriter Christopher Garand. Christian Milton, a former AIG vice president, also was convicted.
Ferguson was sentenced on Dec. 16, 2008, to two years in prison plus two years supervised release and a $200,000 fine. Milton was given four years in jail and ordered to pay $200,000.
Garand is scheduled to be sentenced March 4, Monrad on April 2 and Graham on April 30, according to court records (BestWire, Feb. 25, 2009).
Connecticut-based General Reinsurance Corp. currently has a Best's Financial Strength Rating of A++ (Superior). It is part of the Berkshire Hathaway Insurance Group.
Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.
Shares of AIG were $0.50 in afternoon trading on Feb. 26, up 9.6% from the previous close.
(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)
February 27, 2009
Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved.
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February 26, 2009 Thursday 03:58 PM EST
489 words
Gen Re Agrees to $72 Million Settlement in Finite Reinsurance Civil Case
Alyn Ackermann
COLUMBUS, Ohio
General Reinsurance Corp. has agreed to pay $72 million to settle claims stemming from the reinsurance transaction that led to four or its executives and one from American International Group Inc. being found guilty of federal fraud charges.
The settlement is part of litigation against AIG (NYSE: AIG) brought by Ohio on behalf of the state's public pension funds, claiming that the $500 million finite reinsurance deal allowed AIG to inflate its loss reserves and deceive investors about its financial condition, Ohio Attorney General Richard Cordray said in a statement.
"When the truth about this fraud and other AIG manipulations was made public, the price of AIG stock declined," Cordray said. "Investors, including Ohio's pension funds, had been deceived and suffered significant financial losses."
The settlement must be approved by the United States District Court for the Southern District of New York in Manhattan, Cordray said.
The Ohio Attorney General's Office is litigating the case on behalf of the Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police and Fire Pension Fund, and seeks damages for investors who purchased AIG securities between Oct. 28, 1999, and April 1, 2005.
Cordray said that in October 2008 his office entered into a $97.5 million settlement with PricewaterhouseCoopersLLP as part of the AIG case. PricewaterhouseCoopers was alleged to have violated securities laws by providing auditing services and unqualified audit opinions on AIG's financial statements during the years at issue in the case.
The state's suit against AIG remains open.
Efforts to obtain comment from AIG were not immediately successful.
The four Gen Re executives convicted a year ago in the case, on charges of conspiracy, securities fraud, making false statements to the U.S. Securities and Exchange Commission and mail fraud, were: former chief executive Ronald Ferguson; former assistant general counsel Robert Graham; former chief financial officer Elizabeth Monrad; and former Gen Re senior vice president and chief underwriter Christopher Garand. Christian Milton, a former AIG vice president, also was convicted.
Ferguson was sentenced on Dec. 16, 2008, to two years in prison plus two years supervised release and a $200,000 fine. Milton was given four years in jail and ordered to pay $200,000.
Garand is scheduled to be sentenced March 4, Monrad on April 2 and Graham on April 30, according to court records (BestWire, Feb. 25, 2009).
Connecticut-based General Reinsurance Corp. currently has a Best's Financial Strength Rating of A++ (Superior). It is part of the Berkshire Hathaway Insurance Group.
Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.
Shares of AIG were $0.50 in afternoon trading on Feb. 26, up 9.6% from the previous close.
(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)
February 27, 2009
Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved.
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