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Originally published Tuesday, January 27, 2009 at 3:00 PM

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AIG executive sentenced to 4 years in prison

A former executive of insurance heavyweight American International Group Inc. was sentenced to four years in prison Tuesday in a fraud case that authorities say cost shareholders more than $500 million.

Associated Press Writer

HARTFORD, Conn. —

A former executive of insurance heavyweight American International Group Inc. was sentenced to four years in prison Tuesday in a fraud case that authorities say cost shareholders more than $500 million.

Christian Milton of Wynnewood, Pa., declined to comment during a hearing in U.S. District Court in Hartford. Judge Christopher Droney also fined Milton $200,000 and ordered him to report to the federal Bureau of Prisons on March 25.

Lawyers for Milton said they are preparing an appeal.

Milton, 61, AIG's vice president of reinsurance from 1982 to 2005, was convicted last year of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission.

The investigation also led to the convictions of four former General Re Corp. executives last year for their roles in manipulating AIG's financial statements to falsely inflate AIG's reported loss reserves - a key indicator of the company's financial health.

Prosecutors said New York-based AIG paid Gen Re in a secret side agreement to take out reinsurance policies with AIG in 2000 and 2001, propping up AIG's stock price and inflating the reserves by $500 million.

Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

Milton's lawyer, Frederick Hafetz, told the judge before the sentence was announced that Milton is a good person who was known for helping AIG employees with their problems, including two workers who died from AIDS in the 1980s.

Hafetz also said Milton didn't benefit personally from the fraud, which he called an aberration in Milton's life.

"He has lived a life that our society would prize in its most pious ways," Hafetz said.

Assistant U.S. Attorney Ray Patricco countered that Milton had a financial motive because his substantial deferred compensation plan was tied to AIG's stock price. Patricco said Milton "took every opportunity for an early payout."

"He knew exactly what was at stake in this endeavor," said Patricco, who pointed out that Milton could have protected shareholders and stopped the fraud, which continued more than four years.

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"This was a very serious offense and Mr. Milton was at the heart of it and was AIG's point person," Patricco said.

The judge agreed with the prosecutor.

"He surely knew this was a scam from the very start," Droney said. "This was no momentary lapse in judgment."

Milton's wife, her elderly parents and her adult children and siblings were among those in the courtroom on Tuesday. More than 70 letters were sent to the judge on Milton's behalf, urging leniency. Many were from co-workers and business associates.

Authorities expect Milton to be deported to his native England after he serves his sentence.

Milton's lawyer asked that his client serve his time at Allenwood Federal Correctional Institute in central Pennsylvania. Prison officials have not decided yet where Milton will be imprisoned.

Ronald Ferguson, the former chief executive of General Re, was sentenced in December to two years in prison and fined $200,000 for his role in the fraud.

Three other former Gen Re officials await sentencing. They are former senior vice president Christopher P. Garand, former chief financial officer Elizabeth Monrad and former senior vice president Robert Graham.

General Re is part of Berkshire Hathaway Inc., which is led by billionaire investor Warren Buffett of Omaha, Neb.

Droney made a point of noting that Milton's case was unrelated to the recent financial problems at AIG that led to the federal government providing it with a $150 billion rescue package, including $40 billion for partial ownership in the insurance company.

Copyright © 2009 The Seattle Times Company

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