Houldsworth To Plead Guilty, Cooperate in AIG Probe

John Houldsworth, an executive at Berkshire Hathaway’s General Re unit, has agreed to plead guilty to a federal criminal charge of helping American International Group use reinsurance to distort its finances.Under an agreement with the Department of Justice, Mr. Houldsworth will plead to one count of conspiring with others to misstate AIG’s books, according to his lawyer, Larry Byrne. He will also settle a civil suit from the Securities and Exchange Commission. General Re put him on leave last month.Mr. Houldsworth, 46, is the first person to face a criminal charge in federal and state probes of accounting abuses at AIG, the insurer that restated five years of earnings last month.The plea may put pressure on other people involved in the deal, which triggered the ouster of AIG CEO Maurice “Hank” Greenberg and led Berkshire, run by billionaire Warren Buffett, to sever ties with General Re’s former CEO, Ronald Ferguson.The plea deal “creates a likelihood that other General Re executives who are higher on the pecking order will also be targeted,” said Christopher Bebel, a former SEC attorney who said investigators are probably also building a case against Mr. Greenberg. Prosecutors “work their way up the ladder,” he said.Mr. Greenberg, who stepped down as chairman and CEO of the world’s largest insurer in March, instigated the improper reinsurance transaction four years ago with a phone call to General Re’s then-CEO, Ronald Ferguson, the SEC said in the suit, filed yesterday in U.S. District Court in New York.The SEC said Messrs. Ferguson and Houldsworth, as well as General Re’s then-chief financial officer, Elizabeth Monrad, and Senior Vice President Richard Napier, were among those who knew that AIG’s accounting for the transaction was incorrect. Mr. Houldsworth, who was CEO of General Re’s Cologne Re unit in Dublin at the time, created false documents to disguise the deal’s true nature, the SEC said.“John is cooperating fully with the U.S. DOJ and SEC and accepts full responsibility for his role in these matters,” said Mr. Byrne. “He deeply regrets his actions.”General Re’s reinsurance policies present Mr. Buffett’s greatest regulatory challenge in more than a decade. New York Attorney General Eliot Spitzer called the billionaire, who has controlled Berkshire since 1965, a “cooperative witness” in April.“This case is not about the violation of technical accounting rules,” the SEC said in the complaint. “It involves the deliberate or extremely reckless efforts by senior corporate officers” of General Re to help “senior management” of AIG structure transactions “solely for the unlawful purpose of achieving a specific, and false, accounting effect.”Mr. Ferguson ordered Gen Re officials working on the transaction to keep it under wraps, the SEC said. Officials handling the deal kept the files locked in a desk, and required anyone seeking access to get permission from a small cluster of senior executives, including Mr. Houldsworth, the SEC said.

Houldsworth To Plead Guilty, Cooperate in AIG Probe

Houldsworth To Plead Guilty, Cooperate in AIG Probe

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