Former AIG Vice President Sentenced to Four Years in Prison for Role in Fraudulent Manipulation Scheme

The U.S. Department of Justice reports in its press release (quotation, not an independent finding): “WASHINGTON – The former vice president of reinsurance of American International Group Inc. (AIG), was sentenced today to four years in prison for his role in a fraudulent scheme to manipulate AIG’s financial statements, the Department of Justice announced. Christian M. Milton, 61, of Wynnewood, Pa., who served as vice president of reinsurance at AIG from approximately 1982 to March 2005, was convicted by a federal jury on Feb. 25, 2008, on charges of conspiracy, securities fraud, false statements to the U.S. Securities and Exchange Commission (SEC) and mail fraud. In addition to the prison term, Milton was sentenced by U.S. District Judge Christopher F. Droney to two years of supervised release following his release from prison and a $200,000 fine. Milton was ordered to surrender himself to federal authorities in 60 days. Evidence presented at trial proved that Milton and his co-defendants, Ronald E. Ferguson, Elizabeth A. Monrad, Robert D. Graham and Christopher P. Garand, all former General Reinsurance Corporation (Gen Re) executive officers, engaged in a scheme to falsely inflate AIG’s reported loss reserves, a key indicator of financial health to insurance industry analysts and investors. According to trial evidence, the fraud was carried out through the use of two sham reinsurance transactions between subsidiaries of AIG and Gen Re in response to analysts’ criticism of a $59 million decrease in AIG’s loss reserves for the third quarter of 2000. The two sham transactions, evidence showed, increased AIG’s loss reserves by $250 million in the fourth quarter of 2000 and $2”