US officials Wednesday announced a 92 million dollar settlement with insurance firm General Re, controlled by investor Warren Buffett, for its role in fraudulent accounting practices, including a scheme to help AIG.
The Securities and Exchange Commission said it sued General Re for accounting schemes involving AIG and another insurance company, Prudential Financial, “to manipulate and falsify their reported financial results.”
Gen Re, one of the largest reinsurance firms, agreed to pay 12.2 million dollars to settle the SEC’s charges.
In addition, in a non-prosecution agreement announced by the Department of Justice in connection with a related criminal investigation, Gen Re agreed to pay 19.5 million dollars to a US Postal Inspection Service Consumer Fraud Fund.
The company also agreed to pay 60.5 million dollars through a civil class action settlement to AIG’s injured shareholders.
Gen Re previously forfeited to the government around 5.0 million dollars in fees it earned for its participation in the scheme with AIG.
As part of its agreement with the Justice Department, General Re “has admitted that its most senior management engaged in a scheme to falsely inflate AIG’s reported loss reserves” by the use of “sham reinsurance transactions,” a statement from prosecutors said.
According to officials, Gen Re — a reinsurance firm that provides insurance to commercial insurers — arranged to sell financial products to AIG and Prudential “for the sole purpose of enabling those companies to manipulate their accounting results and mislead investors,” said SEC regional director Andrew Calamari.
The SEC previously charged AIG with securities fraud and improper accounting, and the company settled the charges by paying more than 800 million dollars.
Separate agreements were reached with former AIG chairman Maurice Greenberg and former chief financial officer Howard Smith.
The fraud case dates back to 2000 and 2001, well before AIG neared a 2008 meltdown in mortgage securities it had insured, leading to a government rescue of some 180 billion dollars.
