NEW YORK - An executive for Berkshire Hathaway Inc.'s General Re insurance unit has agreed to plead guilty to a federal criminal charge of helping American International Group Inc. use reinsurance to distort its finances, his lawyer said yesterday.
Under an agreement with the Justice Department, John Houldsworth, 46, will plead guilty to one count of conspiring with others to misstate AIG's books, said his lawyer, Larry Byrne. Houldsworth will also settle a civil suit by the Securities and Exchange Commission. General Re put him on paid leave last month.
Houldsworth, who was chief executive officer of Cologne Re Dublin, a General Re unit, from May 1990 to June 2001, is the first person to face a criminal charge in federal and state investigations of accounting abuses at AIG, the insurer that restated five years of earnings last month.
The allegations triggered the ouster of AIG CEO Maurice "Hank" Greenberg and led Berkshire, run by billionaire Warren Buffett, to sever ties with General Re's former CEO, Ronald Ferguson.
In a separate civil complaint filed in U.S. District Court in Manhattan yesterday, the SEC accused Houldsworth and other senior General Re executives of aiding and abetting AIG's securities fraud.
The SEC said Houldsworth and others helped AIG structure two transactions so that AIG could add $500 million to its balance sheet in the fourth quarter of 2000 and the first quarter of 2001. The SEC said the transactions were initiated by AIG to calm criticism by analysts concerning a reduction in AIG's loss reserves in the third quarter of 2000.
The case was not about a violation of "technical accounting rules," the SEC said.
"It involves the deliberate or extremely reckless efforts by senior corporate officers of a facilitator company [General Re] to aid and abet senior management of an issuer [AIG] in structuring transactions having no economic substance," the SEC said.
It said the transactions "were designed solely for the unlawful purpose of achieving a specific, and false, accounting effect on the issuer's financial statements."
Byrne said Houldsworth "deeply regrets his actions" and is cooperating fully with investigations by the Justice Department and the SEC.
The lawyer said Houldsworth "accepts full responsibility for his role in these matters" and "wants to put these regrettable matters behind him and looks forward to returning to the quiet life he shares with his wife and children in rural Ireland."
Houldsworth is expected to enter the plea to the criminal charge Thursday in U.S. District Court in Alexandria, Va., said Sandi Sonnenfeld, a spokeswoman for law firm White & Case. Houldsworth declined to comment when reached by phone at his home in Ireland.
Byrne said in a telephone interview that Houldsworth could get up to five years in prison but that any sentence would be affected by his cooperation.
The lawyer said his client has agreed to consent to a judgment with the SEC that would require him to disgorge any ill-gotten gains, expose him to civil penalties and bar him from serving as an officer of any company required to file reports with the SEC. Cologne Re Dublin, he said, does not file reports with the SEC.
A message left with General Re, based in Stamford, Conn., was not immediately returned.
In last month's restatements, AIG acknowledged accounting improprieties, including "improper or inappropriate transactions."
The Associated Press and Bloomberg News contributed to this article.