The former chief executive at General Re's Dublin-based subsidiary Cologne Re, John Holdsworth, has agreed to plead guilty to conspiring to mis-state the financial statements of insurance giant AIG.
Mr Holdsworth also faces civil charges of helping to structure two sham transactions in order to bolster AIG’s finances, according to reports from the Wall Street Journal.
While Mr Holdsworth has agreed to cooperate with the SEC and the department of justice, the former AIG chairman and chief exec Maurice Greenberg, who is also targeted in the complaint, has declined to cooperate.
The complaint by the SEC details the alleged role played by Maurice Hank Greenberg in structuring the bogus transactions. It claims that in 2000, Mr Greenberg called General Re, to seek help on how AIG and General Re could create a reinsurance transaction that would transfer $500 million in phony loss reserves to AIG.
For the transactions to be considered legitimate, it should have transferred risk from General Re to AIG, said the SEC, but did not do so. In an official statement the SEC said that the case was not about a violation of technical accounting rules…It involves the deliberate or extremely reckless efforts by senior corporate officers of a facilitator company (Gen Re) to aid and abet senior management of an issuer (AIG) in structuring transactions having no economic substance,
It said the transactions were designed solely for the unlawful purpose of achieving a specific, and false, accounting effect on the issuer’s financial statements.
Mr Greenberg, who was dismissed as AIG chief executive in March 2005, was not charged in the SEC complaint on Monday. Mr Holdsworth’s lawyer said that his client accepted full responsibility for his role and regretted his actions.