Executive of General Re Is Notified of U.S. Case

By TIMOTHY L. O'BRIEN
The New York Times
May 14, 2005


The Justice Department has notified a senior executive of the General Re Corporation, John Houldsworth, that he is the target of the agency's criminal fraud investigation into insurance industry abuses, according to a person briefed on the matter.

Mr. Houldsworth, who once ran General Re's Dublin office, is now an executive with Cologne Re, a General Re subsidiary based in Dublin. Mr. Houldsworth oversaw the doctoring of records pertaining to a questionable insurance transaction between General Re and the American International Group in 2000 that artificially bolstered A.I.G.'s reserves by $500 million, according to several insurance industry executives and investigators briefed on the matter.

In March, A.I.G., which has acknowledged that the transaction was improper, forced out its powerful chairman and chief executive, Maurice R. Greenberg, after General Re lawyers brought the transaction to the attention of law enforcement.

A handful of current and former General Re employees, including Mr. Houldsworth, have already been notified of pending Securities and Exchange Commission actions against them.

The Justice Department action heightens the legal stakes for Mr. Houldsworth and, should more executives receive similar notices, threatens to drag General Re and A.I.G. more deeply into the orbit of a criminal fraud investigation that could have serious implications for both organizations' ability to do businesses.

Berkshire Hathaway, the Omaha holding company controlled by Warren E. Buffett, owns General Re. Berkshire and A.I.G. have been cooperating with the inquiry.

The Justice Department and the S.E.C. have been cooperating closely on their separate investigations of General Re and A.I.G. The New York attorney general, Eliot Spitzer, has been pursuing his own investigation of both companies and has been engaged in a race with his federal counterparts to take a lead role in the inquiries.

The prosecutorial jousting has raised the pressure and the confusion among current and potential targets of the investigations and their lawyers.

The various investigations have opened the once clubby and quiet insurance world to uncomfortable outside scrutiny. The industry has already been reeling from several years of losses associated with large claims involving asbestos, workmen's compensation and terrorism. Now, many of the industry's most high-profile and well-regarded companies and executives have come under the legal spotlight.

General Re's Dublin office has been at the center of many transactions that have drawn the scrutiny of regulators around the globe.

Without naming Mr. Houldsworth, Berkshire said in a filing with the S.E.C. yesterday evening that the Justice Department had told an executive he was a target of the agency's investigation. Berkshire said that the executive was placed on administrative leave with pay effective on Monday, "subject to the employee's continuing cooperation with all governmental investigations."

Berkshire also said the chief executive of the Faraday Group, a General Re subsidiary in London, was placed on leave on the same day and under the same terms. The Berkshire filing did not state his name, but Milan Vukelic is chief executive of Faraday.

Mr. Houldsworth and Mr. Vukelic have not responded to previous calls seeking comment.

The United States attorney for the Eastern District of Virginia, which has been investigating General Re's role in the collapse of a medical malpractice insurer, has also notified another former General Re executive that he or she is a target of that criminal investigation, according to Berkshire's filing.

Berkshire did not give the name of the individual in the filing. Three General Re vice presidents are named as defendants in the Virginia federal suit against former principals and others involved in the collapse of the malpractice insurer, Reciprocal of America. They are Victoria J. Seeger, Tommy N. Kellogg and Thomas M. Reindel.

An online corporate directory did not appear to list any of the executives as working for General Re, but it could not be confirmed who, if any of them, might have left the company. None could be reached for comment.

Copyright 2005 The New York Times Company



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