HARTFORD, Connecticut (Reuters) - A former insurance executive was sentenced to two years in prison on Tuesday for a scheme that prosecutors said allowed the American International Group to manipulate its financial statements through a sham reinsurance deal eight years ago.
Ronald Ferguson, a former chief executive of General Re Corp, a reinsurance unit of Warren Buffett’s Berkshire Hathaway Inc, is the first of five defendants convicted in the fraud to hear his sentence.
The case is not linked to AIG’s mortgage-related losses that led to a near collapse of the company in September and a federal bailout.
In February, a federal jury in Connecticut found all five defendants guilty of conspiracy, securities fraud, making false statements to regulators and mail fraud. Buffett was not charged in the case.
The other four defendants, who also face the possibility of lengthy prison terms, are not expected to be sentenced until next year. All five have been free on bail pending sentencing.
“This transaction was designed to cook the books of AIG. He had many opportunities to step in and stop the deal but he did not,” U.S. District Judge Christopher Droney said of Ferguson in his remarks to the court.
Ferguson must pay a $200,000 fine and undergo two years of supervised release when the sentence ends. Sentencing guidelines were far harsher, calling for life in prison, the judge said, but he chose a lighter sentence because of Ferguson’s “history” and “character.”
“This case is a tragedy especially for Ronald Ferguson. We will never know why such a good man did such a bad thing,” Droney added.
Defense lawyers previously said their clients did not believe they acted improperly in participating in the reinsurance deal at the center of the case and that they intend to appeal their convictions.
Reinsurance is a practice of insurers transferring parts of their risk portfolios to other parties.
At trial, prosecutors said the defendants structured a sham reinsurance transaction with a phony paper trail to make it appear as though General Re had solicited reinsurance from AIG when the parties knew AIG wanted the transaction to manipulate its financial statements.
Reporting by Ted Lorson and Martha Graybow; Editing by Jason Szep and Frances Kerry
Our Standards: The Thomson Reuters Trust Principles.