Judge sees Greenberg role in AIG/General Re case

BANGALORE (Reuters) - A U.S. federal judge who oversaw the trial of executives accused of helping American International Group Inc (AIG.N) inflate reserves said there was sufficient evidence to show the conspiracy started with a phone call from the insurer's former chief executive, Maurice "Hank" Greenberg.

U.S. District Judge Christopher Droney offered his assessment in a Friday ruling in which he denied the five defendants a new trial, clearing the way for them to be sentenced. The transaction involved AIG and General Re Corp, a reinsurance unit of Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N).

Greenberg has not been charged and has long maintained his innocence. He still faces civil charges over his reign at New York-based AIG, which he built over nearly four decades into the world's largest insurer before his 2005 ouster.

Prosecutors in the criminal case accused a former AIG executive and four former General Re executives of conspiring to inflate AIG's loss reserves by $500 million through fraudulent reinsurance transactions beginning in 2000. Among those convicted was former General Re Chief Executive Ronald Ferguson.

In his 29-page decision, seen on the court's Web site, Droney wrote: "The government presented sufficient evidence that, starting with Greenberg's Oct. 31, 2000 phone call to Ferguson, there was an agreement to carry out a transaction to artificially inflate AIG's loss reserves and deceive AIG's investors about the amount of the company's loss reserves and the quality of its earnings."

Droney, who sits in Hartford, Connecticut, said there was "an adequate basis for a rational jury to conclude" the conspiracy began with Greenberg's phone call. His comments arose from an argument by Ferguson that no rational jury could find a conspiracy began around that time.

The judge added that "even though calculating loss reserves usually requires an actuarial assessment after the fact, Greenberg specified the amount of loss reserves he wanted from the deal during that call."

A representative of Greenberg was not immediately available for comment. According to the Wall Street Journal, a spokesman said Greenberg "did seek to buy a loss portfolio from Gen Re," a "normal transaction in the insurance industry," but that conspirators at General Re appear to have created the fraud.

Greenberg holds about 12 percent of AIG shares through both companies he controls and a personal stake. He has yet to win broad support for a revolt against current management, which has struggled with billions of dollars of losses tied to subprime mortgages.

AIG lost $7.8 billion in the first quarter.

(Editing by Kim Coghill)