Ex-Gen Re official admits AIG sham
Irishman's plea is part of bargain to testify
As part of a plea bargain, John Houldsworth of Dublin, Ireland, is aiding a Justice Department investigation of the companies. He could be sentenced up to five years in prison on the single count of conspiracy to file false financial reports.
Houldsworth, 46, who was chief executive of Cologne Re Dublin, a General Re unit, admitted in federal court that he helped create a phony deal that made it appear that AIG - his company's top customer - had boosted its loss reserves by $500 million in late 2000 and early 2001. The plea fulfilled an agreement with the Justice Department announced this week.
Houldsworth declined to comment after yesterday's hearing. General Re had no immediate comment on the plea, company Vice President James W. Heslin Jr. said.
Prosecutor Thomas Hanusik said Houldsworth has met with investigators four times, and more meetings are expected.
Civil charges alleging similar misconduct were filed Monday against Houldsworth by the Securities and Exchange Commission in federal court in New York City.
AIG and Gen Re are major members of the reinsurance industry, which provides insurance to insurers.
According to court documents, AIG had been concerned about insufficient reserves to cover potential losses and approached Gen Re to facilitate a deal that would increase its loss reserves on paper.
Prosecutors have said the deal between the two companies had no substantive value and was designed to cosmetically alter AIG's books. Gen Re received a $5.2 million fee to arrange the sham transactions.
Berkshire Hathaway, the holding company controlled by billionaire investor Warren E. Buffett, disclosed Monday that it had fired Houldsworth after learning about the plea agreement.
The Associated Press and Bloomberg News contributed to this article.