has agreed to pay more than $92 million to settle charges related to its involvement in a fraudulent scheme from 2000 to 2004 to manipulate
General Re's resolution with the Justice Department also includes the reinsurers' admission that its most senior management engaged in two sham reinsurance transactions to falsely inflate AIG's reported loss reserves; these are a key indicator of financial health to insurance industry analysts and investors.
General Re's core businesses involve property and casualty reinsurance.
The settlement consists of General Re's agreement to pay $19.5 million to the U.S. Postal Inspection Service Consumer Fraud Fund; $60.5 million through a civil class action settlement to AIG's injured shareholders; and $12.2 million to settle the U.S. Securities and Exchange Commission's charges related in part to this scheme.
General Re previously contributed $5 million to the Consumer Fraud Fund as forfeiture of the illicit $5 million accommodation fee it received from AIG.
According to the Department of Justice, the two sham transactions increased AIG's loss reserves by $250 million in the fourth quarter of 2000 and $250 million in the first quarter of 2001. This masked a declining trend in loss reserves in the face of premium growth. AIG restated the transactions in filings with the SEC in May 2005.
On Oct. 31, 2008, a U.S. District Court found that AIG's shareholders lost between $544 million and $597 million as a consequence of the fraudulent scheme that General Re participated in.
For more details about General Re's settlement agreement, please click here for the
-- Reported by Andrea Tse in New York
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