The US authorities have indicted a second former director of Cologne Re, the IFSC-based Berkshire Hathaway subsidiary at the centre of a international investigations into malpractice in the reinsurance sector.
The affairs of the company and the "sham" reinsurance contracts it wrote with AIG, the world's biggest reinsurer, have been under investigation for more than a year by the Irish Financial Services Regulatory Authority, the Office of the Director of Corporate Enforcement and international regulators.
As a result of these investigations, Cologne Re is winding down its operation in Dublin. The company is a unit of General Re (GenRe), the reinsurance arm of the Berkshire Hathaway conglomerate led by the billionaire businessman Warren Buffet.
In 2005 accounts, lodged this week in the Companies Office, Cologne Re said the US Securities and Exchange Commission (SEC) filed an enforcement action in February against former director Christopher Garand "for aiding and abetting AIG's violations of federal securities laws in connection with the transactions with AIG".
Mr Garand, who lives in New Jersey, was on the board of Cologne Re in Dublin in 2000 and 2001 when the illegal contracts with AIG were written. Until August 2005, he was head of finite reinsurance in the US for GenRe. In addition to Mr Garand, the SEC indicted three other former GenRe executives in the US - Ronald Ferguson, Elizabeth Monrad and Robert Graham - and a former AIG executive Christian Milton.
John Houldsworth, a former chief executive of Cologne Re in Dublin, is awaiting sentence in the US as a result of his guilty plea to a criminal charge from the US department of justice in relation to the AIG transactions.
The inquiries centre on finite risk reinsurance, a form of reinsurance designed to soften the impact of claims that may have to be paid over a long period.
US regulators allege that deals in 2000 and 2001 between Cologne Re and AIG, in which there was no transfer of risk, enabled AIG to falsely inflate its reserves by some $500 million (€412.41 million).
Scrutiny of these deals last year led AIG to remove its long-time chief executive Maurice "Hank" Greenberg, a legendary figure in the insurance industry.
Cologne Re's directors said in a report with the 2005 accounts that it had not needed to make any adjustment to its current or previous financial statements as a result of the investigations.
It made a profit of $5 million in 2005. "The company's activities generated gross earned income of $143 million; the amount of earned premium income in 2006 will be minimal given that the company is in run-off."
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