General Re executive on fraud charge in US

A SENIOR executive from the Irish operation of reinsurance firm General Re has been charged in the US with assisting fraud at insurance giant American International Group (AIG).

John Houldsworth, 46, has pleaded guilty to one charge of criminal conspiracy in relation to two transactions with AIG.

Mr Houldsworth is a former chief executive of the IFSC branch of General Re and is its chief property and casualty underwriter. He is on paid leave.

The US Securities and Exchange Commission and the Department of Justice claimed Mr Houldsworth was centrally involved in two $250 million transactions that boost profits and revenues at AIG.

“This case is not about the violation of technical accounting rules,” the SEC said in its submission to the District Court in New York. “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.”

Though the charge carries a five-year jail term, Mr Houldsworth may receive much less for co-operating with the investigation of AIG.

Calls to Mr Houldsworth’s home in Dublin last night were not answered.

Mr Houldsworth’s has admitted to one count of conspiring with others to misstate AIG’s financial statements.

His solicitor said: “John is cooperating fully with the US DOJ and SEC and accepts full responsibility for his role in these matters.

“He deeply regrets his actions in working with others to assist in this scheme.”

A hearing will be held later this week in New York.

AIG has already admitted the booking of the two deals was “improper” and should not have been booked as insurance income. The two deals, which happened four years ago, also form the main plank of a case being taken against the company by the New York Attorney General’s office.

It emerged earlier this year that Mr Houldsworth is barred from working in the Australian insurance market.

The barring followed an investigation by a Royal Commission in Australia into the

€3 billion collapse of financial services firm HIH Group. The commission linked several transactions between General Re to the downfall of HIH and barred Mr Houldsworth and five other individuals from the insurance market.

Another General Re executive banned, Tore Ellingsen, worked until recently in the Dublin office of the company. Both men are appealing the bans.

The charges against AIG by the New York Attorney General Elliot Spitzer (which are separate to the case against Mr Houldsworth) alleges that former top management at AIG “routinely and persistently resorted to deception and fraud in an apparent effort to improve the company’s financial results.”

Mr Spitzer called the two transactions with General Re a “sham.”

Investigators around the world are probing the reinsurance sector from the US, and Ireland has been the focus of much of the inquiries as it is home to the fourth-largest reinsurance market in the world, though the Irish regulator insists the country is no financial “wild west”.