We have tried to keep our readers up to date on matters relating to the pending litigation our firm is handling for the Tennessee Insurance Commissioner. But, things are happening so fast that it’s pretty hard to keep our reports current. Recently, four former senior executives of Berkshire Hathaway’s General Re Corp. and a former senior executive of American International Group Inc. were indicted on charges they participated in a scheme to manipulate AIG’s financial statements. The indictment alleges that the defendants engaged in a fraudulent scheme to make it appear as if AIG — which, as you know, is one of the world’s largest insurance companies — increased its loss reserves, a key financial indicator to analysts and investors.

At issue are two reinsurance transactions between AIG and Gen Re that were initiated by an AIG senior executive in an attempt to stop criticism by analysts of an approximate $59 million reduction in AIG’s loss reserves in the third quarter of 2000. The phony transactions made it appear as though AIG had increased its loss reserves by $500 million, according to authorities. The conspiracy, using phony contracts and a secret side deal, was designed to make it appear that AIG’s loss reserves were growing, in order to inflate the company’s stock price in 2000 and 2001.

The Connecticut indictment says there were additional unnamed coconspirators, including senior level executives at AIG and Gen Re. Last year, two senior Gen Re executives, John Houldsworth and Richard Napier, pleaded guilty to conspiracy to falsify Securities and Exchange Commission (SEC) filings and are awaiting sentencing. A trial in the criminal case has been scheduled for March 1st of next year.

Source: Business Insurance Journal

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