Ronald Ferguson, the former General Reinsurance chief executive officer, helped American International Group (AIG) "lie" about its balance sheet, a prosecutor said yesterday as his fraud trial began.
Mr Ferguson and four other defendants are accused of using a sham reinsurance deal to help AIG inflate reserves by $500 million (€340 million) in 2000 and 2001, deceiving investors about the insurer's ability to absorb losses.
The defendants are charged with conspiracy, securities and mail fraud, and making false statements. "The goal of this conspiracy was to help AIG lie," said assistant US attorney Raymond Patricco in opening remarks in a federal court in Hartford, Connecticut. "When you know the true deal, but document a false one, that is a lie."
A Gen Re subsidiary in the IFSC, Cologne Re Dublin, played a role in the transactions at the centre of the allegations.
Mr Ferguson had the blessing of his ex-boss, billionaire Warren Buffett, the defendant's lawyers said in a motion before the trial began. Lawyers for the defendants are scheduled to begin their opening arguments later today.
Mr Buffett, chairman of General Re parent Berkshire Hathaway, has not been charged with wrongdoing and has denied any knowledge of improper dealings.
Charged along with Mr Ferguson are former General Re chief financial officer Elizabeth Monrad; Christopher Garand, a former senior vice-president; Robert Graham, former assistant general counsel; and Christian Milton, the former head of reinsurance at New York-based AIG. All say they are innocent.
The case centres on contracts initiated after analysts criticised AIG's reduction of reserves in 2000. AIG appeared to provide $600 million of reinsurance coverage in exchange for a payment of $500 million in premiums that AIG booked as reserves, according to the indictment. - (Bloomberg)
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