Another General Re exec pleads guilty
June 10, 2005
ALEXANDRIA, Va. — A second former top executive at Berkshire Hathaway Inc.'s General Re insurance unit pleaded guilty today to conspiring to file false financial reports as part of a phony transaction designed to burnish the books of American International Group Inc., his company's top customer.
Richard Napier, 53, a senior vice president at Gen Re in 2000 and 2001 when the sham transaction occurred, pleaded guilty today to a single criminal conspiracy count brought by the Justice Department at U.S. District Court.
Napier's plea comes one day after John Houldsworth, a former chief executive at an Irish subsidiary of Gen Re, pleaded guilty to an identical charge. Both men have agreed to cooperate with prosecutors' investigation of the case.
Berkshire Hathaway, the Omaha-based holding company, said it fired Napier after learning of his plea. Houldsworth also was fired after word of his agreement surfaced.
In a statement of facts signed by Napier that accompanies his plea agreement, Napier said he was told in October 2000 by Gen Re's CEO at the time, Ronald E. Ferguson, that then-AIG CEO Maurice Greenberg asked Ferguson to help concoct a transaction that would increase AIG's loss reserves by $500 million on paper without actually transferring any risk to AIG.
"Napier was directed to help AIG complete this transaction and was told it would be best to complete the Gen Re side of the transaction outside of the United States," according to the statement of facts.
Gen Re and AIG are major players in the reinsurance industry, which provides insurance to other insurers. The Securities and Exchange Commission alleges that AIG was seeking to quiet criticism in late 2000 from Wall Street analysts about insufficient loss reserves.
Gen Re received a $5 million fee for setting up the phony transactions that benefited AIG, according to court documents.
Napier, like Houldsworth, faces a maximum of five years in prison when they are sentenced Dec. 9. Prosecutors requested and received a deferred sentencing date to make it easier for the two to continue their cooperation with investigators.
Napier declined comment after today's hearing.
A spokesman at Gen Re also declined comment.
Also today, the SEC charged Napier in a civil suit in federal court in Manhattan with aiding and abetting securities fraud. The SEC had previously charged only Houldsworth.
Napier agreed to a partial final judgment against him in the civil suit that bars him from serving as an officer or director of a publicly held company for the next five years. Any civil penalties or fines will be determined at a later date.
Houldsworth accepted a permanent ban from serving as an officer or director as part of a previously entered judgment against him.
"With each settlement, we move closer to our objective, which is to hold all responsible persons accountable for their actions in this financial fraud," said Linda Chatman Thomsen, director of the SEC's enforcement division.
Gen Re is a part of Berkshire Hathaway, the holding company led by billionaire investor Warren Buffett. Buffett has said he was not directly involved in the transaction.