Houldsworth sacked by General Re

REINSURANCE firm General Re has sacked a senior executive from its Dublin operation who has been charged with conspiracy in the US.

John Houldsworth, who has pleaded guilty in the US to one charge of conspiring with others to misstate the accounts of insurance giant American International Group, had been chief executive of General Re's Dublin subsidiary Cologne Re until 2001 and was still employed in a senior capacity.

He stepped down as chief executive in June 2001, but remained on as its chief property and casualty underwriter. The company placed Mr Houldsworth on paid leave last month while the investigations of its dealings with AIG was carried out.

The US Department of Justice claimed Mr Houldsworth, who is English but has worked in Dublin since 1990, was centrally involved in arranging two $250 million (€203m) transactions with AIG in late 2000 and early 2001 that had the affect of boosting its financial performance.

AIG, itself the subject of legal action by the New York Attorney General's office, has already admitted the transactions were improper as they should have been booked as loans and not premiums, which ended up helping AIG meet profit expectations.

Mr Houldsworth is expected to make a court appearance in Virginia later this week.

He faces up to five years in prison though, given his co-operation with the investigations so far, he may get a reduced sentence.

His solicitor Larry Byrne said Mr Houldsworth has accepted full responsibility for his role in the affair and "wants to put these regrettable matters behind him and looks forward to returning to the quiet life he shares with his wife and children in rural Ireland."

Mr Houldsworth has also settled the civil claim against him by the US financial watchdog, the Securities & Exchange Commission (SEC) though without admitting or denying liability.

He has agreed to be permanently barred from serving as a director or officer of a company and will face a fine.

In its claims against Mr Houldsworth, the SEC said it was a case of "deliberate or extremely reckless efforts" by executives at General Re "to aid and abet senior management of an issuer (AIG) in structuring transactions, having no economic substance, that were designed solely for the unlawful purpose of achieving a specific, and false, accounting effect on the issuer's financial statements."

It said: "The only economic benefit to either party of the transactions at issue was a $5.2m (€4.2m) fee - agreed to, in an undisclosed side agreement - to be paid by AIG to Gen Re for putting this deal together. The 'premiums' purportedly due AIG under the terms of the bogus transaction documents were merely window dressing and were in fact pre-funded by AIG to Gen Re in another undisclosed side agreement.

"Gen Re and AIG also created a phoney paper trail to make it appear as though Gen Re had solicited reinsurance from AIG when, in fact, AIG had solicited the deal to manipulate its financial statements." Mr Houldsworth is also banned from working in the Australian financial service market after an investigation into a collapsed insurance firm that had dealings with General Re.