Four former General Reinsurance Corp. executives and one at American International Group Inc. would win dismissal of accounting fraud charges under proposed deferred-prosecution agreements with the government.

The Justice Department Friday filed in court five agreements with the executives, who were convicted in 2008 of fraud for helping to deceive AIG investors through a sham transaction in 2000 and 2001.

They were sentenced to prison terms of as much as four years. An appeals court overturned the convictions and ordered a new trial in Hartford, Connecticut.

U.S. District Judge Vanessa Bryant must approve the agreements covering former General Re Chief Executive Officer Ronald Ferguson, ex-Chief Financial Officer Elizabeth Monrad, ex-Senior Vice President Christopher Garand, ex-Assistant General Counsel Robert Graham, and former AIG Vice President Christian Milton. Prosecutors agreed to drop the case in a year if the executives abide by the accords and follow the law.

Each executive would acknowledge that “aspects” of the transaction were fraudulent, that they disregarded red flags suggesting the deal would be “improperly accounted for,” and that they “should have attempted to stop it from going forward, but instead continued to participate in it,” according to their agreements filed in federal court in Hartford.

Under the agreements, Ferguson would pay a $200,000 fine, Milton would pay $200,000, Monrad would pay $250,000, Garand would pay $150,000, and Graham would pay $100,000.

“It's not a defeat for the Department of Justice, but they also can't claim any great victory,” said Peter Henning, a law professor at Wayne State University in Detroit. “It was a very difficult trial the first time. Whether they could have been convicted again is very much an open question.”

While prosecutors can close the case, Henning said, “the defendants avoid prison and made a modest admission of culpability. It lets them move on with their lives without a criminal conviction on their record.”

The agreements cited several factors for the government's actions including the “significant government resources” that a retrial would require. Prosecutors also said that the underlying transaction took place 12 years ago, and several of the executives have already been barred from serving as officers or directors of public companies.

New Trial

Thomas Carson, a spokesman for U.S. Attorney David B. Fein in Connecticut, declined to comment on the agreements. The case was handled by the federal prosecutors in Connecticut and the Eastern District of Virginia and at the Justice Department in Washington.

Lawyers for the five attorneys didn't return phone calls or e-mails seeking comment yesterday.

The U.S. Court of Appeals in New York had ordered the new trial in August. A new trial was set for Jan. 22.

At the trial, jurors convicted each defendant of charges including conspiracy, securities fraud, mail fraud and making false statements to the U.S. Securities and Exchange Commission.

Prosecutors said Ferguson and his subordinates set up a phony reinsurance deal after Maurice “Hank” Greenberg, then-chief executive officer of New York-based AIG, sought to assuage investors about the reserves.

The trial featured testimony about Greenberg and billionaire Warren Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., which owns General Re. Neither was charged with a crime, and both denied wrongdoing.

The case is U.S. v. Ferguson, 3:06-cr-00137, U.S. District Court, District of Connecticut (Hartford).

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