Federal prosecutors in Connecticut said Friday that a scheme to manipulate the financial statements of American International Group Inc. (AIG), resulted in a loss of more than $1 billion to investors. Prosecutors offered the estimate in connection with the sentencing of four former executives of General Re Corp. and a former executive of American International Group who were convicted earlier this year of fraud. As reported by the Associated Press, their scheme reportedly involved AIG paying Gen Re as part of a secret side agreement to take out reinsurance policies with AIG in 2000 and 2001, propping up its stock price and inflating reserves by $500 million.
Prosecutors advised the court that a study by their expert concluding the fraud-related losses to AIG shareholders totaled $1.2 billion to $1.4 billion under one methodology or $543 million to $598 million under another. Prosecutors acknowledged that either method was reasonable.
Prosecutors did not recommend a specific sentence, and stated only that the defendants should receive a “substantial” prison sentence. A report by the probation department recommends sentences of 14 to more than 17 years for each defendant.
