4 Insurance Executives Indicted

Three former executives at Berkshire Hathaway Inc.’s General Re Corp. insurance unit and a former American International Group Inc. executive have been indicted by a federal grand jury on charges of fraud and conspiracy, the Justice Department announced Thursday.

The indictment was returned by a grand jury in Norfolk, Va., charging the former executives with conspiring to make AIG’s finances appear better than they were.

Those charged are Ronald Ferguson, who was General Re’s chief executive; Elizabeth Monrad, the company’s former chief financial officer; Robert Graham, General Re’s former assistant general counsel; and Christian Milton, who ran AIG’s reinsurance division.

The defendants put together a sham reinsurance transaction that allowed AIG to fraudulently report about $500 million in loss reserves “to mislead AIG’s shareholders, stock market analysts and the investing public,” the indictment said. The conspiracy was designed to make it appear that AIG’s loss reserves were growing to pump up the price of AIG stock, according to the indictment.

“The message is straightforward: Cooking the books is a recipe for disaster,” said Linda Thomsen, enforcement director at the Securities and Exchange Commission, which filed a related civil lawsuit Thursday alleging that the defendants aided AIG’s securities fraud.

The indictment stemmed from the Justice Department and SEC investigations of a 5-year-old deal between the two companies, major players in the reinsurance industry, which sells insurance to primary insurers to help spread risk. Wide-ranging investigations of the reinsurance business are being conducted by authorities in the United States and elsewhere.

General Re parent Berkshire Hathaway Inc., an investment company based in Omaha, is led by influential billionaire Warren Buffett.