Speech by SEC Staff:
Remarks Regarding SEC v. Ronald Ferguson, Elizabeth Monrad,
Robert Graham, Christopher Garand and Christian Milton;
Press Conference at U.S. Department of Justice
Linda Chatman Thomsen
Director, Division of Enforcement
U.S. Securities and Exchange Commission
February 2, 2006
Good morning. Today, the SEC filed civil securities fraud charges against five individuals for helping AIG falsely inflate its loss reserves. As in the criminal action, the defendants in the SEC's action are some of the former top officers of Gen Re, including the company's CEO, CFO and Assistant General Counsel, and one former executive of AIG. In addition, the SEC's complaint also charges one additional former executive of Gen Re, the former head of Gen Re's finite insurance operations.
The Commission's complaint alleges that the defendants helped AIG concoct two sham reinsurance transactions to allow AIG to inflate its loss reserves in the fourth quarter of 2000 and first quarter of 2001 by a total of $500 million. The transactions enabled AIG to reverse what would otherwise have been a trend of declining loss reserves - a metric closely followed by Wall Street. The SEC's complaint seeks permanent injunctive relief, disgorgement of any ill-gotten gains, civil money penalties, and orders barring each defendant from ever serving as an officer or director of any public company.
This case reflects our continuing effort to hold accountable all those responsible for this particular fraud. Today's complaint brings to seven the number of individuals charged in connection with this transaction.
More broadly, the case is part of the SEC's industry-wide investigation of the misuse of insurance and reinsurance products to commit accounting fraud. The message of these cases is simple-cooking the books is a recipe for disaster.
Our investigation is not over. The Commission will continue its work and will work with the Justice Department to hold accountable everyone responsible for the Gen Re transaction. We also continue our investigation of the misuse of insurance products to commit accounting fraud.
I would like to recognize the tremendous job done by the staff of the SEC's New York office on this investigation. I would also like to thank Assistant Attorney General Alice Fisher and the Department of Justice, the United States Attorney for the Eastern District of Virginia and the U.S. Postal Inspection Service for their great work, their assistance and their commitment to this investigation.