Christian Milton, Former AIG Vice President, Sentenced to 4 Years for Fraud Scheme
A former American International Group Inc. (AIG) vice president, Christian M. Milton, has been sentenced to four years in prison for his role in a fraudulent scheme to manipulate AIG’s financial statements.
U.S. District Judge Christopher F. Droney handed down the sentence, which includes two years of supervised release following Milton’s release from prison and a $200,000 fine. Milton, 61, of Wynnewood, Pa., was convicted by a federal jury on February 25, 2008, on charges of conspiracy, securities fraud, false statements to the U.S. Securities and Exchange Commission (SEC) and mail fraud.
The scheme, which involved Milton and four other former General Reinsurance Corporation (Gen Re) executive officers, was designed to falsely inflate AIG’s reported loss reserves. The goal was to mask a declining trend in loss reserves in the face of premium growth. Evidence presented at trial showed that the fraud was carried out through two sham reinsurance transactions between subsidiaries of AIG and Gen Re.
The two sham transactions, which increased AIG’s loss reserves by $250 million in the fourth quarter of 2000 and $250 million in the first quarter of 2001, were used to make it appear as though Gen Re had solicited reinsurance from AIG. However, the evidence demonstrated that the parties knew AIG wanted the transaction to manipulate its financial statements.
When the investigation was disclosed to investors by AIG and through various media outlets between February 14 and March 14, 2005, shares of AIG stock dropped from $73.12 to $61.92. In 2008, Judge Droney found that AIG’s shareholders lost between $544 million and $597 million as a consequence of the defendants’ fraudulent scheme.
The case was prosecuted by Principal Deputy Chief Paul E. Pelletier and Assistant Chief Adam Safwat of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorneys Eric J. Glover of the District of Connecticut and Ray Patricco of the Eastern District of Virginia. Milton was ordered to surrender himself to federal authorities in 60 days.
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