Washington, D.C., June 10, 2005 – LAWFUEL – The Law News Network – The Securities and Exchange Commission announced today that it has charged a second senior executive of General Re Corporation, Richard Napier, for his role in aiding and abetting a securities fraud committed by American International Group, Inc. In an amended complaint filed today in federal court in Manhattan, the Commission added Napier as a defendant in the action it instituted on June 6, 2005, against John Houldsworth, a former Gen Re executive and former CEO of a Gen Re subsidiary, Cologne Re Dublin. Napier was a Gen Re Senior Vice President and the executive responsible for Gen Re’s relationship with AIG. The amended complaint alleges that Napier, together with Houldsworth and others, helped AIG structure two sham reinsurance transactions that had as their only purpose to allow AIG to add a total of $500 million in phony loss reserves to its balance sheet in the fourth quarter of 2000 and the first quarter of 2001. The transactions were initiated by AIG to quell criticism by analysts concerning a reduction in the company’s loss reserves in the third quarter of 2000.
In partial settlement of the Commission’s claims, without admitting or denying the allegations, Napier has consented to the entry of a partial final judgment, which resolves all issues of liability against him and defers the determination of disgorgement and penalties until a later date. As part of his settlement, Napier has agreed to cooperate fully with the Commission’s continuing investigation of this matter.
In connection with the same conduct, both Napier and Houldsworth have also entered guilty pleas to criminal charges filed by the U.S. Department of Justice, Fraud Section (DOJ) in a Virginia federal court. Under the respective plea agreements, each defendant has agreed to cooperate fully with DOJ’s continuing investigation.
Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement, said, “With each settlement, we move closer to our objective, which is to hold all responsible persons accountable for their actions in this financial fraud.”
Mark K. Schonfeld, Director of the Commission’s Northeast Regional Office, said, “These cases send a message that we will hold accountable those who knowingly help to create the contractual building blocks on which a securities fraud is built.”
The Commission’s amended complaint charges Napier with aiding and abetting the violations by AIG and others of Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 of the Securities Exchange Act of 1934. Napier, in addition to undertaking to cooperate fully with the Commission, consented to the entry of a partial final judgment permanently enjoining him from future violations of the above-cited provisions, barring him from serving as an officer or director of a public company for five years following the entry of the partial final judgment against him and deferring the determination of civil penalties and disgorgement to a later date.
The Commission’s investigation is continuing. The Commission acknowledges the assistance and cooperation of the U.S. Department of Justice Criminal Fraud Division and the U.S. Postal Inspection Service in this matter.