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20 May 2013
Pension funds seeking millions of dollars in compensation from Berkshire Hathaway subsidiary Gen Re have been granted a second chance on appeal.
Four funds representing teachers, police, fire and public sector employees are seeking $US72 million ($68.68 million) from Gen Re, alleging finite reinsurance contracts issued by it to AIG caused the value of their AIG stock to fall.
In 2008, US District Judge Christopher Droney ruled the deception cost AIG shareholders at least $US544 million ($518.95 million), but a three-judge panel threw out the compensation case the following year.
However, the US Second Circuit Court of Appeal last week ordered a lower court to reconsider the case.
In late 2000 and early 2001, Gen Re engineered several sham reinsurance deals with AIG, allowing the insurer to boost its loss reserves by $US500 million ($477 million) and convince analysts the company was on a sound financial footing.
At the height of the global financial crisis in 2008, AIG collapsed with debts of $US182.3 billion ($173.8 billion) and was kept intact only through US Treasury intervention.
The funds’ compensation hopes received a boost in June, when five former executives admitted the transactions were fraudulent following a series of trials.
The admissions allow former Gen Re CEO Ronald Ferguson, CFO Elizabeth Monrad, Senior VP Christopher Garand, Assistant General Counsel Robert Graham and AIG VP Christian Milton to avoid jail sentences.
All received fines of between $US100,000 ($95,397) and $US250,000 ($238,494). The five were handed prison sentences of between one and four years in 2008 but the convictions were quashed in August last year due to procedural errors in the case.
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