Gen Re ex-finance chief prison-bound in fraud case

Elizabeth A. Monrad, the former finance chief of General Re Corp., is heading to prison for her part in a scheme that inflated American International Group Inc.’s financial statements. U.S. District Judge Christopher F. Droney sentenced her yesterday to 18 months in prison, followed by three years of supervised release. The judge also ordered Ms. Monrad to pay $250,000 in fines. Assistant U.S. attorneys Eric J. Glover of the District of Connecticut and Raymond E. Patricco of the Eastern District of Virginia are the prosecutors on the case. Ms. Monrad’s sentencing is the latest chapter in a storied scheme conducted between Stanford, Conn.-based Gen Re and AIG of New York. The companies allegedly set up two reinsurance transactions to add $500 million in AIG’s loss reserves in 2000 and 2001 to cover a trend of falling reserves in the face of premium growth. Those moves raised AIG’s stock price and made the carrier’s finances appear healthy to analysts and investors. However, the scheme was revealed to the public in 2005, resulting in a drop in AIG’s share price to $61.92, from $73.12 in May that year, and AIG had to restate the transactions in filings with the Securities and Exchange Commission. The scandal led to the departure that year of AIG’s chief executive, Maurice R. “Hank” Greenberg, who was also named as an unindicted co-conspirator in a federal court case related to the fraud. Shareholders lost between $544 million and $597 million as a result of the scheme. Joining Ms. Monrad in prison are former Gen Re chief executive Ronald Ferguson, who was sentenced to two years in prison and was fined $200,000; Christian Milton, former head of reinsurance at AIG, who will get four years in prison and was fined $200,000; and Gen Re former senior vice president Christopher Garand, who was sentenced to 12 months and one day in prison and was fined $150,000. Former Gen Re assistant general counsel Robert Graham, who has also been convicted, is awaiting sentencing.