More Sham Reinsurance Deals and 50 Lashes with a Wet Noodle for the Perp

If you steal $5,000 from a bank using a weapon the penalty is sure, swift and severe. Steal millions from everyday American citizens and one of Chris Dodd’s Hartford based federal judge friends will slap you with a minimal prison sentence. Pull out a chair and find out about justice for the super wealthy and politically connected – Hartford style.

Let’s start at the National Underwriter and yesterday’s sentencing of General Re’s former CEO Ronald E. Ferguson:

Ignoring a government request that he serve significant time, a federal judge today sentenced former General Re. Corp. chief executive officer Ronald E. Ferguson to two years in prison for securities fraud involving a sham reinsurance transaction.

U.S. District Court Judge Christopher F. Droney in Hartford, Conn., also imposed a $200,000 fine and two years of supervised release on the 66-year-old executive.

Mr. Ferguson was ordered to report to a Bureau of Prisons facility on Feb. 18, 2009, if he is unsuccessful in arguments at a prior court hearing that he should remain free on bond pending his appeal of conviction to the 2nd Circuit U.S. Court of Appeals.

He was convicted in February with four other executives of a complicated reinsurance deal with a hidden side agreement that permitted American International Group to inflate its financial picture.

The other defendants convicted with Mr. Ferguson–who remain to be sentenced–are Christopher Garand (a former Gen Re senior vice president), Robert Graham, (Gen Re’s former senior vice president and counsel), Elizabeth Monrad (Gen Re’s former chief financial officer) and Christian Milton (former AIG vice president for reinsurance).

Last month, Judge Droney found that the scheme cost shareholders more than $500 million. The government said the amount was up to $1.4 billion.

The judge ruled that the defendants did not have to pay restitution, because attempting to locate the thousands of investors would delay the sentencing process.

I find it curious that Droney did not make Ferguson pay restitution to some of the people he fleeced in the interest of time as we’ve been following this case for 18 months and the end result for the people that were defrauded is zip, zilch, nada I mean not even a tube of vaseline for ya.

And certainly the judge and the prosecutors knew that shareholders were not the only victims of these sham reinsurance transactions. This story on the larger saga ran via McClatchy about 18 months ago and included victims longs forgotten by Judge Droney:

Dr. Joel Schroeder of Olathe, Kan., lost his coverage when he needed it the most.

The family of Bertha Walker, who’d died of a stroke at 71, had filed a medical malpractice lawsuit against him. The suit dragged on for five years, until a judge awarded her family $750,000 in damages.

Schroeder said he could pay only about $10,000. He’s now suing his insurance broker for selling him the Reciprocal policy. The Walker family, however, may never collect.

The whole ordeal probably would have been avoided if he’d had coverage, said Schroeder, who’s since signed up with a new insurer.

“There’s a chance that a settlement could have been reached before trial,” he said. “But I didn’t have enough money to offer a settlement that the family would accept.”

Greg Mitchell, an attorney for 25 Kentucky hospitals and former policyholders with Reciprocal, said the Justice Department’s decision disappointed his clients because the loss of coverage had hurt many of them financially.

I think it has become very clear that we have two systems of justice in this country, one for the wealthy and politically connected and another for the other 99.5% of the populace. I know this, if I could steal millions and only have to pay with two years with no restitution I think I’d take that deal. Robbing banks is for schmucks; discriminating criminals know that stealing millions with a pen is not only safe but is far more lucrative.

Lady justice is crying today, just not as hard as millions of fleeced investors, Bertha Walker’s family and Dr. Schroeder.


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