Joseph Brandon has resigned as chairman and chief executive of General Re.
This is part of the fall-out from a criminal prosecution. As my regular readers may remember (I discussed it here), a jury in Connecticut, in February, found executives of two reinsurance companies guilty of a scheme to defraud the shareholders of one of them.
Apparently, General Re agreed to assist the other company involved, AIG, in booking a transaction between the two firms in such a way as to overstate the size of AIG's loss reserves.
Brandon himself was not among those convicted, and hasn't been charged. But he was, as the saying goes, the captain of the General Re ship when the sailors misbehaved.
He may be responsible for more than inattentive captaincy, though. The Wall Street Journal said last week that prosecutors have been pressuring the mother company of General Re, Berkshire Hathaway, to show Brandon the door.
And the captain of the Berkshire Hathaway ship, of course, is the legendary Warren Buffett.
Weather might get unpleasant even in margaritaville in the weeks and months to come.
Showing posts with label General Re. Show all posts
Showing posts with label General Re. Show all posts
Tuesday, April 15, 2008
Tuesday, February 26, 2008
AIG Guilty Verdict
A jury in Hartford, Conn. has found one of AIG's executives guilty in a scheme to manipulate that company's financial statements.
The man at the defense table was Christian Milton, formerly AIG's vice president of re-insurance. He was convicted along with four executives from the General Re Corp., whom I won't name here because my own interest is in the AIG side of the case.
Milton remains free on bond pending a sentencing hearing in May. His attorney, Frederick Hafetz, said he'll appeal. No doubt one of his contentions on appeal will be precisely that Milton shouldn't have been lumped in with the General Re crowd. Interestingly, each of the General Re defendants was higher-ranking in their organization than Milton was in his.
The other reason to focus on Milton rather than the General Re defendants is that the scheme is supposed to have been for his company's benefit, not theirs. The General Re folks were supposedly just trying to accomodate AIG, given its importance in the industry. The government charged that General Re agreed to assist AIG in accounting shenanigans that inflated its (AIG's) loss reserves figure. That, in turn, presumably calmed the nerves of investors and helped sustain AIG's stock price.
So why only a lowly vice-president in the dock from AIG? The prosecutor said he hopes to work "up the ladder," and presumably at the top of that ladder is the fellow who was CEO at the time, Hank Greenberg.
Getting up those rungs is by no means a foregone conclusion. Assuming just for the purpose of discussion (a) that Milton is guilty as charged, and (b) that he was committig crimes because his superiors told him to ... the inference would have to be that he has NOT ratted out those superiors yet, and that its unlikely the prosecution has more to offer him now in return for co-operation than whatever they were offering him in the pre-trial and pre-verdict negotiations.
Still, the whole thing might have a chilling effect on Greenberg's desire (one he tentatively expressed in November) to start playing an active role again at his old company.
The man at the defense table was Christian Milton, formerly AIG's vice president of re-insurance. He was convicted along with four executives from the General Re Corp., whom I won't name here because my own interest is in the AIG side of the case.
Milton remains free on bond pending a sentencing hearing in May. His attorney, Frederick Hafetz, said he'll appeal. No doubt one of his contentions on appeal will be precisely that Milton shouldn't have been lumped in with the General Re crowd. Interestingly, each of the General Re defendants was higher-ranking in their organization than Milton was in his.
The other reason to focus on Milton rather than the General Re defendants is that the scheme is supposed to have been for his company's benefit, not theirs. The General Re folks were supposedly just trying to accomodate AIG, given its importance in the industry. The government charged that General Re agreed to assist AIG in accounting shenanigans that inflated its (AIG's) loss reserves figure. That, in turn, presumably calmed the nerves of investors and helped sustain AIG's stock price.
So why only a lowly vice-president in the dock from AIG? The prosecutor said he hopes to work "up the ladder," and presumably at the top of that ladder is the fellow who was CEO at the time, Hank Greenberg.
Getting up those rungs is by no means a foregone conclusion. Assuming just for the purpose of discussion (a) that Milton is guilty as charged, and (b) that he was committig crimes because his superiors told him to ... the inference would have to be that he has NOT ratted out those superiors yet, and that its unlikely the prosecution has more to offer him now in return for co-operation than whatever they were offering him in the pre-trial and pre-verdict negotiations.
Still, the whole thing might have a chilling effect on Greenberg's desire (one he tentatively expressed in November) to start playing an active role again at his old company.
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