A JURY in the US has convicted five former insurance executives of fraud charges in relation to an illegal scheme to manipulate the finances of insurance giant AIG with a "sham" reinsurance deal routed through Cologne Re, an IFSC firm owned by Warren Buffett's Berkshire Hathaway group.
Those convicted at a federal court in Hartford, Connecticut, include a former Cologne Re director, Christopher Garand, who was a senior vice-president of the Dublin firm's immediate parent, General Reinsurance.
A former chief of the IFSC company, John Houldsworth, was one of two main prosecution witnesses. Houldsworth previously pleaded guilty to conspiring to abet false accounting at AIG.
Tom Carson, spokesman for the US attorney's office in Connecticut, said Houldsworth "will be sentenced at some point" over his role in the deal. He declined to say whether Houldsworth's co-operation with the prosecution would mitigate any sentence handed down to him.
The prosecution alleged that the transaction involving Cologne Re enabled AIG to fraudulently inflate its reserves by $500 million in 2000 and 2001 to make its balance sheet look stronger than it was, boosting its share price. The Irish reinsurance market then was unregulated, like others in the EU.
Three other former top-ranking General Re officials were convicted: Ronald Ferguson, a former chief executive; Elizabeth Monrad, former chief financial officer; and Robert Graham, former assistant general counsel. The fifth person convicted was Christian Milton, former head of reinsurance at AIG.
Sentencing is scheduled for May 15th. Defence lawyers for Garand, Ferguson and Milton said they will appeal.
While the investigation into the affair is continuing, Mr Carson would not say whether any other Dublin executives were under scrutiny. Cologne Re's involvement in the affair led to Dublin being characterised as a financial "Wild West" after the case first emerged into the open in March 2005, a characterisation rejected by the Irish Financial Services Regulatory Authority.
It transpired that Houldsworth and another Dublin executive had been barred by Australian regulators almost six months previously over their role in a similar deal. Houldsworth remained in situ, although the regulator in Dublin later said it had taken immediate steps to ensure that he was stood down as a director.
Additional reporting, Bloomberg
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