WASHINGTON, DC & LONDON - A former executive of American International Group (AIG) has been given a four-year prison sentence for manipulating the insurance firm's financial statements. Christian Milton, previously vice-president of reinsurance at AIG between 1982 and March 2005, was found guilty by US district judge Christopher Droney and jailed for conspiracy, securities fraud and other charges.
Prosecutors alleged Milton was part of a scheme to falsely inflate AIG reported loss reserves, misleading investors and analysts about the firm's financial health. The scheme followed criticisms of a drop in AIG's loss reserves in the third quarter of 2000 and involved sham reinsurance transactions between AIG subsidiaries and reinsurer General Re. Gen Re's former chief executive Ronald Ferguson was sentenced to two years in prison in 2008 for his part in the scheme. Milton faces an additional two years supervised release and a $200,000 fine. He must surrender himself to federal prison authorities within 60 days. AIG, previously the world's largest insurer, received an $85 billion US government bail-out loan in September 2008 - which has since increased to $152 billion.
In a separate case, UK authorities are investigating possible illegal transactions at the insurer's UK subsidiary AIG Financial Products, involved in the sale of credit default swaps. The unit lost £8 billion before its US parent was forced to seek government funding. The Serious Fraud Office and Financial Services Authority are understood to be seeking documentation from the firm's UK offices. Details of the probe are sketchy, but investigators have said AIG's insurance operations are not involved.
More on Regulation
Dodd-Frank and Mifid II won't stop market disorder but will penalise hedgers
Floors framework should not overstate risk, says Sweden's bank supervision chief
RBS risk veteran says banking activities pose greater threat
Banks will have to figure out what constitutes ‘critical activities’ for themselves
Sign up for Risk.net email alerts
Oxford professor David Vines argues that the carrot is as important as the stick
Sponsored webinar: IBM
Watch highlights of this year's London conference
Operational risk and the challenges of defining and dealing with conduct risk
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.