General Re settles with US over AIG, Prudential

Discussion in 'Wall St. News' started by Tauvros, Jan 20, 2010.

  1. Tauvros

    Tauvros

    Wednesday January 20, 2010, 2:42 pm EST

    WASHINGTON (Reuters) - A unit of Warren Buffett's Berkshire Hathaway Inc (NYSE:BRK-A - News), General Re, has agreed to pay $92.2 million to settle accusations that it helped American International Group Inc (NYSE:AIG - News) and Prudential Financial Inc (NYSE:pRU - News) manipulate financial statements, the U.S. government said Wednesday.

    The Department of Justice has agreed not to criminally prosecute General Re for helping AIG misstate results, in exchange for General Re's cooperation in any ongoing individual investigations and acceptance of responsibility.

    General Re also settled civil charges that it allegedly participated in a series of sham reinsurance contracts with AIG and Prudential that helped improve the companies' results.

    The Securities and Exchange Commission alleges that General Re entered into a series of phony contracts with Prudential's property and casualty division from 1997 to 2002 that allowed Prudential to improperly recognize over $200 million in revenue from 2000 through 2002.

    Prudential settled civil charges in 2008. The SEC had accused Prudential of violating financial reporting provisions.

    In 2000, after analysts criticized AIG for declining loss reserves and its stock dropped, General Re entered into two sham reinsurance transactions that allowed AIG to falsely report increases in both loss reserves and premiums written, the SEC alleged.

    AIG settled the SEC charges in 2006.

    "(General) Re arranged to sell financial products to AIG and Prudential for the sole purpose of enabling those companies to manipulate their accounting results and mislead investors," Andrew Calamari, an SEC associate director, said in a statement.

    Calls to General Re's lawyer were not immediately returned. An AIG spokesman had no comment. A Prudential spokesman said the company settled with the SEC in 2008 and there was no finding of fraud.