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Second Guilty Plea Entered in AIG Case

June 11, 2005|From Times Wire Services

A second former top executive at Berkshire Hathaway Inc.'s General Re insurance unit pleaded guilty Friday 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 Friday to a single criminal conspiracy count in U.S. District Court in Alexandria, Va.

Napier's plea came 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 the Justice Department's investigation of the case.

Berkshire Hathaway, the Omaha-based holding company controlled by billionaire investor Warren E. Buffett, said it fired Napier after learning of his plea. Houldsworth also was fired after word of his agreement surfaced.

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 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.

Also Friday, 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 executive 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 on his serving as an executive or director as part of a previously entered judgment against him.

Separately Friday, AIG disclosed that Howard Smith, who was fired as chief financial officer of AIG in March amid an accounting probe, resigned his remaining post as director of the insurer's board.

Maurice "Hank" Greenberg, who was ousted as chief executive in March, also stepped down from AIG's board this week.

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Associated Press and Bloomberg News were used in compiling this report.

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