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November 3, 2008

Notable rulings on loss and other sentencing issues in AIG/Gen Re case

Thanks to a helpful reporter, I now have a copy of a notable sentencing ruling in a notable white-collar case out of Connecticut.  This AP story provides the background:

A federal judge has ruled that shareholders of American International Group Inc. lost more than $500 million as a result of a scheme to manipulate the financial statements of the world's largest insurance company.  The ruling Friday by Judge Christopher Droney means five former insurance executives convicted of the scheme could face up to life in prison under advisory sentencing guidelines.

Four former executives of General Re Corp. and a former executive of AIG were convicted in February of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission. Prosecutors filed court papers citing a study by its expert, concluding the fraud-related losses to AIG shareholders totaled $1.2 billion to $1.4 billion.  They cited another methodology by the expert that put the losses at $544 million to $597 million, but said either method is reasonable.

Droney rejected the higher estimate, but said the lower range was reasonable.  That finding and a determination that the fraud affected more than 250 victims will increase the advisory guideline sentence range. The guideline range and a sentencing date have not been set yet.

The defendants challenged the estimate, saying there was no loss to investors....

A report by the probation department recommended sentences of 14 years to more than 17 years for each defendant.

The 21-page ruling in US v. Ferguson et al., No. 3:06CR137 (CFD) (D. Conn. Oct. 31, 2008), can be downloaded below:

Download Gen_Re_ruling.pdf

November 3, 2008 at 03:47 PM | Permalink


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When you brought this case up earlier the $500mill threshold seemed like it had been met easily.

Posted by: Soronel Haetir | Nov 3, 2008 7:41:42 PM

I've noticed a lot of confusion in press reports on this ruling. The way I read it, the judge assigned all five defendants an offense level of 43, before any other individual enhancement or decreases. Under sentencing guidelines offense level 43 is life in prison, period. (level 42 is 360 months to life) that's the top of the chart - 43 is he highest. And that already takes into account that they have no prior crimnal record.

that is very very hefty. How far will the juge feel comfortable coming down from that.

Posted by: anon | Nov 4, 2008 5:46:54 PM

I hope the judge takes into account the more serious view the public has about such crimes after Enron and other cases that prompted changes in the guidelines. Disparity with prior cases is not a bad thing in these situations.

Posted by: Soronel Haetir | Nov 4, 2008 6:03:55 PM

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