- The Washington Times - Thursday, April 2, 2009

HARTFORD, CONN. (AP) - The former chief financial officer at General Re Corp. was sentenced Thursday to 18 months in federal prison for her role in an accounting fraud scandal that artificially propped up the stock price of insurer American International Group Inc.

Elizabeth Monrad, 52, of New Canaan was also fined $250,000 for her role in the case, which authorities say cost AIG shareholders more than $500 million. She remains free on bond pending an expected appeal of her conviction.

U.S. District Judge Christopher Droney said Monrad had plenty of opportunity to stop the deal and noted that she was involved from the beginning.

“She was the financial expert for General Re in this transaction,” Droney said. “Her advice was critical to concealing the paper trail.”

The judge added, “A message must be sent to the business and financial communities that this kind of conduct will not be tolerated.”

In tearful speeches, Monrad begged Droney for a lenient sentence while several of her relatives and friends testified about her devotion to family and community service, including her sponsorship of needy children in Appalachia and Sri Lanka.

“This conviction is at odds with the professional life and work ethic I’ve tried to live,” she told Droney.

Monrad’s lead attorney, Reid Weingarten, told the judge that Monrad was new to the job at the time of the transaction, that her objections to parts of the deal were ignored and that she deferred to respected businessmen, including former AIG Chief Executive Maurice “Hank” Greenberg and former Gen Re Chief Executive Ronald Ferguson.

“It didn’t immediately occur to her that … “I’m in the middle of a conspiracy,’” Weingarten said. He also said Monrad trusted AIG accountants to follow all laws in documenting the deal.

Federal prosecutors say New York-based AIG paid Stamford-based Gen Re in a secret deal to take out reinsurance policies with AIG in 2000 and 2001. They say the scheme propped up AIG’s stock prices and inflated reserves by $500 million with the goal of quelling criticism by analysts and easing concerns by investors.

Reinsurance policies are purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

Monrad was Gen Re’s chief financial officer from June 2000 to July 2003. She was convicted last year of conspiracy, securities fraud, making false statements to the Securities and Exchange Commission and mail fraud after a five-week trial.

She had faced up to 210 years in prison and a fine of up to $46 million.

Federal prosecutor Eric Glover on Thursday criticized Monrad for failing to take responsibility for her actions and blaming others.

“She was found guilty of perpetrating a fraud, and that fraud was cooking the books of AIG,” he said.

The judge and defendants in the case have said in court papers that there was no link between the eight-year-old deal and AIG’s recent financial troubles that sparked a federal financial-rescue package.

Monrad was the fourth executive to be sentenced. Ferguson was sentenced in December to two years in prison and fined $200,000, while former AIG vice president Christian Milton was sentenced to four years in prison and fined $200,000. Last month, Gen Re’s former senior vice president, Christopher Garand, was sentenced to a year and a day in prison and fined $150,000.

Still to be sentenced is Robert Graham, a former General Re senior vice president.

General Re is part of Berkshire Hathaway Inc., which is led by billionaire investor Warren Buffett of Omaha, Neb.

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