Gen Re paying $92.2M to settle charges

[Joanne98]

The insurer General Re Corp. has agreed to pay $92.2 million to settle charges by federal authorities and shareholder claims over its alleged role in accounting misconduct schemes by American International Group Inc. and Prudential Financial Inc.

The Securities and Exchange Commission and the Justice Department announced the settlements Wednesday with Gen Re, which is part of Berkshire Hathaway Inc., the company led by billionaire investor Warren Buffett.

Gen Re, based in Stamford, Conn., is paying $19.5 million in a non-prosecution agreement with the Justice Department regarding its criminal probe of Gen Re's transactions with AIG.

Under that accord, Gen Re acknowledged that its senior managers engaged in a scheme from 2000-2004 to falsely inflate by $500 million AIG's reported loss reserves, a key indicator of financial health, the department said. It said the fraud was conducted through the use of two sham insurance transactions between subsidiaries of AIG and General Re in response to analysts' criticism of a $59 million decline in AIG's loss reserves for the third quarter of 2000.

The SEC said Gen Re is paying $12.2 million to settle the agency's civil charges over AIG and Prudential. The SEC had said that Gen Re engaged in sham transactions with AIG and Prudential that enabled those companies to "manipulate and falsify" their financial results about 10 years ago.

In addition, Gen Re will pay $60.5 million to resolve a class-action lawsuit by AIG shareholders, the SEC and the Justice Department said.

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http://www.businessweek.com/ap/financialnews/D9DBPN3O0.htm