Today, the Department of Justice (DOJ) announced that the former vice president of the reinsurance group at American International Group Inc. (AIG), Christian Milton, was sentenced to four years in prison for participating in a scheme to manipulate AIG’s financial statements. In addition to the prison term, Milton, who must surrender himself to federal authorities within 60 days, was sentenced to two years of supervised release after being released from prison and ordered to pay a $200,000 fine.
Milton, along with four other defendants who were all executive officers of General Reinsurance Corporation (Gen Re), was convicted by a federal jury last February for conspiracy, securities fraud, false statements to the Securities and Exchange Commission (SEC) and mail fraud. Milton and the former Gen Re executives engaged in two sham transactions to falsely inflate AIG’s reported loss reserves, a key indicator of financial health used by insurance industry analysts and investors, by a total of $500 million in 2000 and 2001. Furthermore, the defendants falsely reported the increase in loss reserves on statements to investors, analysts and the SEC. According to evidence presented at trial, the defendants knew that the purpose of the sham transactions was to permit AIG to falsely report an increase in loss reserves. The sentencing judge found that as a result of this fraudulent scheme, AIG shareholders lost between $544 million and $597 million.