Lawyer in Gen Re Trial Questions Witness’ Veracity

As reported by "Business Insurance", former General Re Corp. Chief Financial Officer Elizabeth Monrad's attorney on Monday accused a star government witness of lying in previous statements to prosecutors and regulators, aiming to raise doubts about whether Ms. Monrad expected American International Group Inc. (AIG) to account improperly for an allegedly fraudulent 2000 loss portfolio reinsurance deal with Gen Re. 
 
Ms. Monrad’s lawyer's Reid Weingarten asked John Houldsworth, former chief executive officer of Gen Re’s Cologne Re Dublin unit, whether he told about a dozen federal investigators at a 2005 interview that that he did not know how AIG accounted for the 2000 transaction. 
 
Mr. Houldsworth conceded that he did tell investigators this, when in fact he was “pretty sure” he did know that AIG had reported the deal improperly as risk-bearing reinsurance rather than as a deposit. 
 
“You have the ability to look 12 people in the eye and tell them falsehoods, isn’t that true?” demanded Mr. Weingarten, who is with Steptoe & Johnson in Washington. 
 
“It would appear so, yes,” Mr. Houldsworth replied. 
 
Mr. Houldsworth, who pleaded guilty to conspiracy in the case and is cooperating with the government, began his first day of cross-examination Monday after several days of questioning by Assistant U.S. Attorney Eric Glover. 
 
One of former General Re Corp. Chief Financial Officer Elizabeth Monrad's attorney on Monday accused a star government witness of lying in previous statements to prosecutors and regulators, aiming to raise doubts about whether Ms. Monrad expected American International Group Inc. (AIG) to account improperly for an allegedly fraudulent 2000 loss portfolio reinsurance deal with Gen Re. 
 
Ms. Monrad’s lawyer then asked why Mr. Houldsworth didn’t try to structure the AIG loss portfolio as a finite deal with such a combination. 
 
“I was just trying to hold out one alternative,” he answered. 
 
Mr. Houldsworth testified earlier that he understood from an initial phone conversation with Ms. Monrad on Nov. 13, 2000, that the deal was to include no cash payment to AIG and no tax consequences for Cologne Re Dublin, and that it was to transfer no risk to AIG. The contract he proposed appeared to cede up to $600 million in liabilities—a figure he testified he pulled “out of the air”—for a $500 million premium.  
 
Mr. Monrad’s defense contends that she accounted for the deal properly as a deposit in Gen Re’s books, told AIG how Gen Re would account for it and had no reason to believe AIG would book it improperly. 
 
In his opening statement, Mr. Weingarten painted Mr. Houldsworth as a “trash-talker,” and he pointed Monday to a recorded Nov. 15, 2000, conversation with Ms. Monrad and others in which Mr. Houldsworth observed—referring to former AIG Chairman Maurice R. Greenberg and Warren Buffett, chairman of Gen Re parent Berkshire Hathaway Inc.—that “Hank treats his auditors like Warren does: fairly aggressively, fairly aggressively.” 
 
On the stand, Mr. Houldsworth acknowledged that the statement was disparaging but said that he was joking. 
 
Mr. Weingarten also asked repeatedly whether Mr. Houldsworth, at various points in the deal’s development, believed he was committing a crime. 
 
“Did you have any suspicion that you were about to embark on a path to criminality?” he asked after questioning Mr. Houldsworth about an early discussion of the deal with Ms. Monrad. 
 
“Did I think…that I would be here today? Definitely not,” Mr. Houldsworth said.