US market watchdogs have charged one of the world’s largest reinsurers for
its involvement in separate schemes by American International Group and
Prudential Financial, Inc to manipulate and falsify their reported financial
Re Corporation, a subsidiary of Warren Buffet’s Berkshire Hathaway
investment company, agreed to pay $12.2m (£7.5m) to settle the SEC’s charges.
The schemes involved “sham reinsurance contracts” which allowed AIG and
Prudential Financial, Inc to puff up their numbers.
“Gen Re arranged to sell financial products to AIG and Prudential [Financial,
Inc] for the sole purpose of enabling those companies to manipulate their
accounting results and mislead investors,” said Andrew M Calamari, Associate
Director of the SEC’s New York Regional Office.
Prudential Financial, Inc, a company whose principal place of business is in
the US, is not affiliated in any manner with FTSE 100 company Prudential plc.
Gen Re agreed to pay an additional $19.5m after a related criminal
investigation of the reinsurer’s transactions with AIG by the Department of
The reinsurer will also pay $60.5m through a civil class action settlement to
AIG’s injured shareholders.
The SEC previously charged AIG with securities fraud and improper accounting,
and the company settled the charges by paying more than $800m.
Former chairman Maurice R. “Hank” Greenberg and former chief financial
officer Howard I Smith, as well as former senior executives of Gen Re for their
roles in connection with the scheme with AIG.
The Commission separately charged Prudential Financial, Inc with securities
laws violations in 2008.
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