Three former executives of Berkshire Hathaway’s General Re unit and a former American International Group official were indicted on charges of conspiring to distort AIG’s finances.

A federal grand jury in Virginia said Ronald Ferguson, General Re’s former chief executive officer, Elizabeth Monrad, its former chief financial officer, and Robert Graham, former assistant general counsel, designed a sham reinsurance transaction to inflate AIG’s reserves for claims. Christian Milton, who had overseen reinsurance at New York-based AIG, was also part of the 13-count indictment, prosecutors said yesterday.

“The four executives arranged a complex scheme to cook the books at AIG,” said Alice Fisher, assistant attor ney general for the criminal division of the Department of Justice, at a press conference in Washington. “The scheme was designed to mislead analysts and the investing public.”

Prosecutors may use the indictments to wrest guilty pleas and build cases against others involved in the five-year-old contract between AIG and Stamford, Conn.-based General Re, said Jacob Frenkel, a former federal prosecutor. Regulators probing the deal questioned Berkshire Chairman Warren Buffett and led AIG to remove Maurice “Hank” Greenberg as CEO of the world’s largest insurer.

“Sometimes it takes the filing of an indictment to induce a plea and cooperation,” Mr. Frenkel, who now practices law at Shulman, Rogers, Gandal, Pordy & Ecker in Rockville, Md., said. Investigators will probably “continue to climb up the ladder.”

The four were charged with one count of conspiracy,four counts of securities fraud, two counts of false statements to the SEC, four counts of wire fraud,and two counts of mail fraud.The charges carry a maximum possible sentence of 95 years in prison and more than $7 million in fines for each former executive. They will be arraigned February 16 in federal district court in Alexandria,Va.,a court spokesman,Edward Adams, said.

The U.S. Securities and Exchange Commission simultaneously filed civil suits against the four for aiding and abetting securities fraud. Christopher Garand, the 58-year-old former head of General Re’s finite reinsurance operations, was also sued.

Frederick Hafetz, Mr. Milton’s attorney, said “he will vigorously contest the charges and is confident that he will be exonerated at trial.”

Mr. Graham’s attorney, Alan Vinegrad, called his client “an attorney of the highest integrity who always acted in good faith and within the bounds of the law.” Mr. Graham “looks forward to having his day in court and expects to be vindicated,” Mr.Vinegrad said.

Mr. Garand’s lawyer, Robert Cleary, said his client had cooperated fully with the SEC and “voluntarily” met with the agency’s investigators.

“I was surprised that they filed a complaint and quite frankly dismayed,” Mr. Cleary said. “He has done nothing wrong, and we’re confident that at the end of this, he’s going to be vindicated.”

Ms. Monrad and her lawyer, Paul Shechtman, didn’t return phone calls, nor did Mr. Ferguson’s attorneys, Douglas Koff or Clifford Schoenberg. Berkshire Chief Financial Officer Marc Hamburg didn’t return a phone call. Stanley Twardy, a General Re lawyer, declined to comment, as did Mr. Greenberg’s spokesman, Howard Opinsky.

Joseph Brandon, General Re’s current CEO, is also under investigation and was notified by the SEC in September that he may be sued by the agency. Mr. Brandon, 46, could face civil penalties or be barred from serving as an officer of a public company, Omaha, Neb.-based Berkshire said at the time.

“I wouldn’t want to talk about additional charges but the investigation is absolutely continuing,” Ms. Fisher said.

Shares of Berkshire fell $300 to $88,690 in New York Stock Exchange composite trading. AIG fell 80 cents, or 1.2%, to $65.47.