Attachment A

AGREED STATEMENT OF FACTS

I. Introduction

A. General Reinsurance Corporation and AIG

1. General Re Corporation (“General Re”) was and is a Connecticut-based

company and a subsidiary of Berkshire Hathaway, Inc. (“Berkshire”), a company incorporated in

Delaware with its principal place of business in Omaha, Nebraska.

2. General Re, through its subsidiaries, is one of the world’s largest providers

of reinsurance services. General Re owns General Reinsurance Corporation (“Gen Re”), which

had and has reinsurance operations in the United States and elsewhere. Beginning in 1994, Gen

Re acquired an interest in Kolnische Ruckversicheerungs-Gesellschaft AF (“Cologne Re”),

which had and has a subsidiary in Dublin, Ireland, known as Cologne Re Dublin (“CRD”).

3. American International Group, Inc. (“AIG”) was the world’s largest

provider of insurance and also provided financial services to other financial institutions. AIG was

incorporated in Delaware with its principal place of business in New York, New York. Certain of

AIG’s securities were registered with the SEC pursuant to Section 12(b) of the Securities

Exchange Act of 1934 and listed on the New York Stock Exchange.

4. AIG held numerous subsidiaries that were providers of insurance,

including National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“NUFIC”) and

Hartford Steam Boiler Inspection and Insurance Company of Hartford, Connecticut (“HSB”),

which it acquired in 2001. The financial information of NUFIC and HSB was consolidated into

AIG’s financial statements, which were filed with the SEC.

 B. Overview of Gen Re’s Role in the LPT Transaction with AIG

5. Beginning on October 31, 2000, and continuing through early January

2005, General Re, through its subsidiary Gen Re, Gen Re’s affiliate CRD, and the conduct of

certain of its most senior management, participated and assisted in a sham reinsurance

transaction with AIG, which AIG used to falsely report inflated loss reserves in its public

financial statements for Q4 2000, fiscal years 2001 through 2003, and the first three quarters of

2004. Loss reserves represent probable and reasonably estimable future loss claims on

underwriting policies that insurance companies are required to account for under Generally

Accepted Accounting Principles (GAAP). Periodic changes in loss reserves are reflected as a

separate expense on an insurance company’s income statement and aggregate loss reserves are

reflected as a separate liability on an insurance company’s balance sheet. Insurance companies

are required to report loss reserves in their financial statements filed with the SEC and in

separate financial statements filed with state insurance regulators.

6. Stock market analysts and investors were and are interested in an

insurance company’s loss reserve development because, among other things, it is an indicator of

whether management is sufficiently anticipating future loss claims against the company.

Management’s failure to adequately account for loss reserves for policies that the company is

underwriting may therefore impact the company’s future earnings. Because the adequacy of a

company’s loss reserves inherently involves judgments by senior management, the failure of

management to properly account for loss reserves may reflect on the business judgment of the

company’s management and the reliability of its financial statements. Evidence that showed that

the company’s management may have deliberately manipulated the company’s reported loss

reserves would also undermine the perceived integrity of the company’s management and the

company’s financial statements.

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 7. Gen Re, through certain of its then senior management and executives, as

an accommodation to AIG, one of its largest purchasers of reinsurance, agreed to undertake a

transaction involving existing portfolios of reinsurance held by one of Gen Re’s overseas

affiliates, CRD, to one of AIG’s subsidiaries, NUFIC. The transaction, termed the Loss Portfolio

Transfer (“LPT”) by the parties, nominally exposed AIG to $600 million in potential loss for a

premium of $500 million. Two percent (2%), or $10 million, of the premium purportedly was to

be advanced by Gen Re to AIG (the “premium fee” or “2% fee”), and the remainder purportedly

to be held by CRD in an experience account, in which interest earned on the funds withheld

would be offset by claims against AIG under the LPT. In truth, as certain members of Gen Re’s

then senior management knew, (1) AIG’s management did not seek to bear any real risk under

the LPT; (2) AIG in fact would not and did not bear any real reinsurance risk under the LPT; (3)

AIG would and did pre-fund the premium through an apparently unrelated transaction; (4) CRD

would not and did not maintain an experience account in connection with the LPT; and (5) AIG

would and did provide Gen Re with an accommodation fee of $5 million, also via an apparently

unrelated transaction, that was not documented in the sham formal LPT contract (the

“accommodation fee” or “1% fee”).

8. Under Generally Accepted Accounting Principles (“GAAP”), a

reinsurance transaction must transfer sufficient risk from the party seeking reinsurance (“the

reinsured”) to the party providing reinsurance coverage (“the reinsurer”) in order for the

purported reinsurer to account for the transaction as reinsurance, thereby permitting the reinsurer

to book additional loss reserves as liabilities. The purported reinsurer is also required to

independently determine whether it will be exposed to risk under the terms of a reinsurance

contract, as determined pursuant to GAAP, before it can account for the transaction as

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reinsurance under GAAP. A reinsurance transaction that does not qualify for reinsurance

accounting because it does not transfer sufficient risk must be accounted for by the reinsurer

using “deposit” accounting, resulting in the recording of deposit assets and deposit liabilities that

are separate from loss reserves. Whether or not the parties to a reinsurance transaction have

accounted symmetrically for a transaction (i.e., both parties will record the transaction either as

reinsurance or as a deposit), GAAP requires that the party recording the transaction as

reinsurance conduct its own separate analysis of risk transfer in the transaction.

9. Certain of Gen Re’s then senior management knew and understood that

AIG’s management did not wish to bear any real risk under the LPT and that AIG lacked

sufficient information to conduct its own independent actuarial assessment of risk transfer in the

LPT. These executives understood that since Gen Re would not transfer sufficient risk to AIG

under the LPT, AIG was not permitted under GAAP to account for the LPT as reinsurance, and,

therefore, was not permitted to record any loss reserves for the LPT. These executives had no

reason to believe that AIG was entering into the transaction for any purpose other than booking

additional loss reserves. These executives also understood that Gen Re (through its affiliate

CRD) would account for the transaction as a deposit, but that neither AIG nor Gen Re would

disclose in their financial statements the asymmetrical accounting treatment. Disclosure of the

asymmetrical accounting treatment could potentially have brought increased scrutiny of the

transaction from AIG’s auditors, regulators and investors, which, in turn, could potentially have

hindered AIG’s ability to conceal the fraudulent nature of the transaction.

10. Some analysts were concerned by AIG’s disclosure that on October 26,

2000, its loss reserves for general property and casualty insurance had declined by $59 million.

The reinsurance transaction with Gen Re was wrongly used by AIG to falsely increase its

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reported loss reserves for general property and casualty insurance by $250 million in Q4 2000

and an additional $250 million in Q1 2001, thereby masking declines in general property and

casualty insurance loss reserves in the amount of $144 million and $187 million for each of those

quarters, respectively. The transaction also allowed AIG to report total loss reserves for general

property and casualty insurance that were improperly inflated by $500 million in every quarter

thereafter through Q3 2004. Certain of Gen Re’s then senior management had reason to believe,

furthermore, that AIG’s motive for entering into the transaction was for AIG to deceive analysts,

shareholders and members of the investing public about the true state of its loss reserves.

11. Notwithstanding their knowledge regarding AIG’s motive for entering the

transaction, certain of Gen Re’s then senior management and executives aided and abetted AIG

in the falsification of its financial statements. These executives at Gen Re, with the assistance of

an attorney then in Gen Re’s legal department: documented the fraudulent transaction, and

created a false paper trail to make it appear as if Gen Re’s affiliate CRD was soliciting

reinsurance from AIG’s subsidiary NUFIC, when in fact it was AIG that contacted Gen Re

seeking to consummate the LPT transaction; agreed pursuant to an undisclosed oral

understanding to use the balance of funds from unwinding an unrelated transaction with another

AIG subsidiary to fund the premium fee that Gen Re owed AIG under the purported LPT and to

fund the accommodation fee; created an additional false reinsurance transaction to justify the

movement of money from Gen Re to CRD to pre-fund the premium and to fund CRD’s portion

of the fee; and failed to disclose the true nature of the transaction to regulators through January

of 2005, when Gen Re disclosed the transaction and the facts surrounding it to the government.

II. Gen Re Structures a No Risk Reinsurance Transaction to Accommodate AIG

12. On October 26, 2000, AIG announced that the company’s loss reserves for

general insurance underwriting had declined by $59 million in Q3 2000. AIG’s stock closed that

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day at $93.31 per share, down approximately six percent from its closing price the previous day

of $99.37. On October 31, 2000, a senior executive at AIG (hereinafter “AIG SE #1”), who was

identified as an unindicted co-conspirator in the related federal criminal proceedings captioned

United States v. Ferguson, et al., 06-137 (D. Ct. 2006), contacted Ronald E. Ferguson

(“Ferguson”), Gen Re’s then CEO, to propose a transaction between AIG and Gen Re that would

permit AIG to record between $200 to $500 million in loss reserves on its balance sheet for a six-

to-nine month period. AIG SE #1 also specified, however, that he/she wanted loss reserves from

Gen Re’s “long tail” lines of reserves, i.e., portfolios of reinsurance reserves for underlying

policies that would not mature into liabilities for the reinsurer in the near term. That same day,

Ferguson debriefed Richard Napier (“Napier”), then a senior vice president at Gen Re and the

primary relationship manager for AIG, on the substance of AIG SE #1’s request.

13. Ferguson directed Napier to consult with a senior executive of Gen Re’s

management team (hereinafter “Gen Re SE #1), who was identified as an unindicted co-

conspirator in the related federal criminal proceedings captioned United States v. Ferguson, et

al., 06-137 (D. Ct. 2006), about accommodating AIG SE #1’s request. Gen Re SE #1 suggested

to Napier that, among other things, in structuring the transaction it might be best to stay away

from Gen Re’s U.S. companies to avoid creating issues that might result if Gen Re reported large

fluctuations in its reported reserves in the United States. Gen Re SE #1 further suggested to

Napier that he should consider, among other possibilities, using reserves located at Cologne Re

Dublin.

14. In an email dated November 1, 2000, to Ferguson, Gen Re SE #1,

Elizabeth Monrad (“Monrad”), the then CFO of Gen Re, and other members of senior

management, Napier wrote that he had confirmed with AIG that AIG only wanted “reserve

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impact” from the transaction and was not concerned about receiving funds for the reinsurance

premiums from Gen Re. Napier further wrote that the transaction appeared to be “in response to

analysts’s negative reaction to AIG’s reserve reductions at Q3.” Napier again advised Ferguson,

Gen Re SE #1, Monrad and others on November 7, 2000, that AIG’s interest in the transaction

may be related to analyst criticism of AIG’s Q3 2000 loss reserve decline and distributed an

analyst’s comment reflecting the market’s concern about AIG’s loss reserves.

15. By November 13, 2000, certain of senior management at Gen Re had

concluded that the transaction should be structured using CRD. Monrad then contacted John

Houldsworth, the CEO of CRD, about the proposed transaction. In conversations on November

13 and 14, 2000, Monrad informed Houldsworth that AIG’s motivation for entering the

transaction was to address further stock market criticism of its loss reserves, and that AIG

wanted to book $500 million in reserves without being exposed to real risk of loss. Monrad also

informed Houldsworth that the deal had to be finalized by year end 2000, which corresponded

with the end of AIG’s fourth quarter for 2000. Monrad further advised Houldsworth that it was

important to use reserve portfolios in one of Gen Re’s subsidiaries outside the United States to

avoid regulatory reporting requirements. Finally, Monrad emphasized that it was important that

the transaction not be disclosed in CRD’s public filings in Ireland, and Houldsworth responded

that it would not have to be disclosed.

16. Separately, in an email dated November 13, 2000, Monrad advised

Ferguson that AIG would probably book the transaction as reinsurance because AIG wanted to

record loss reserves associated with its underwriting business. Monrad further advised Ferguson

that because Gen Re would record the transaction as a deposit, the companies might have

“nonmirror image accounting” for the transaction.

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 17. On November 15, 2000, Houldsworth circulated to Monrad, Napier and

others a draft contract for a reinsurance transaction between CRD (the reinsured) and NUFIC

(the reinsurer) for coverage in an aggregate amount of $600 million in exchange for a $500

million premium, 98% of which would purportedly be withheld by CRD in an interest bearing

“experience account,” against which CRD would charge claims. Houldsworth explained by

email that he understood that Gen Re and AIG did not intend to transfer “real risk” to AIG in the

transaction. Further, Houldsworth proposed that AIG would be denied access to CRD’s client

records supporting the reserves. Without access to information about the reserves, AIG’s

actuaries could not determine whether the contract transferred risk. Houldsworth also indicated

that CRD would “deposit account” for the transaction and that CRD would request “tight

confidentiality” from its outside audit firm in connection with their review of the transaction.

18. In preparing the draft contract, Houldsworth considered the likely

audience for the draft contract to be persons looking at the accounting for the transaction on

behalf of AIG.

19. After Monrad and Napier received Houldsworth’s draft contract, they

discussed the fact that the contract was designed to make it appear as if Gen Re transferred risk

to AIG, when in fact Gen Re would not charge AIG for any losses under the contract, rendering

the loss exposure of AIG inconsequential. They also discussed Gen Re’s ability to unilaterally

terminate the contract and Gen Re’s purported payment of a $10 million fee to AIG under the

terms of the contract. They further discussed the fact that AIG would have an “accounting

problem” if it booked loss reserves under the contract and that the contract presented

“reputational risk” for Gen Re. Napier subsequently briefed Ferguson on the structure of the

contract for the LPT.

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 20. On or about November 17, 2000, AIG SE #1 and Ferguson discussed

additional details of the transaction. Ferguson advised Napier about his discussion with AIG SE

#1, and Napier then informed Gen Re SE #1, Monrad and others that Ferguson and AIG SE #1

had agreed to a reinsurance transaction involving CRD and NUFIC; that the transaction would be

in two “tranches” in successive quarters (Q4 00 and Q1 01), each tranche involving $250 million

premium; that AIG would pay Gen Re a 1% accommodation fee; and that among the details to

be worked out later was how Gen Re would “recover” the $10 million “premium” fee it would

advance to AIG. Ferguson later cautioned the recipients of Napier’s email to “keep the circle of

people involved in this as tight as possible.”

21. In an email to Monrad, Napier and Christopher P. Garand (then a Senior

Vice President and Chief Underwriter for finite reinsurance at Gen Re, and a member of CRD’s

Board of Directors) on December 8, 2000, Houldsworth asked whether Gen Re “need[ed] to

produce a paper trail offering the transaction to [AIG],” when in fact it was AIG that had

solicited the transaction. That same day, in a conversation with Monrad and Napier, Houldsworth

again discussed whether AIG needed to create an offer letter to make it look like “a piece of risk

business,” and Monrad in turn suggested the need for a “paper trail” showing the gross cash

flows, including a wire transfer from CRD to AIG in the amount of $10 million, which Gen Re

would then have to recover from AIG.

22. In a conversation on December 11, 2000, Houldsworth advised Garand

that he was considering creating a phony “paper trail” to make the transaction appear legitimate.

In that conversation, Houldsworth also discussed the need for certain senior executives to “sign

off on the reputational risk” associated with the transaction, to which Garand suggested that

Houldsworth should get them to “sign in blood.”

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 23. Houldsworth subsequently drafted an offer letter from CRD to NUFIC

requesting NUFIC’s participation in the reserve transaction, when in fact he and others knew the

opposite was true. He forwarded the false offer letter to Monrad and to Gen Re’s then in-house

counsel, Robert D. Graham. Graham advised a then senior executive in Gen Re’s legal

department (hereinafter “Gen Re SE #2"), who was identified as an unindicted co-conspirator in

the related federal criminal proceedings captioned United States v. Ferguson, et al., 06-137 (D.

Ct. 2006), in an email dated December 22, 2000, that CRD would “book the transaction as a

deposit,” that “[h]ow AIG books it is between them, their accountants and God,” and that “there

is no undertaking by [AIG] to have the transaction reviewed by their regulators.” Graham

further advised Gen Re SE #2 that certain then senior management were aware of and had signed

off on the reputational risk associated with the transaction. In a conversation on December 27,

2000, Graham informed Houldsworth that, notwithstanding that meetings and conversations for

the transaction were occurring at Gen Re’s headquarters in Stamford, the “paper trail” of “deal

correspondence” should lead to CRD in Dublin. On December 27, 2000, Houldsworth sent the

contract for the first tranche ($250 million) of the LPT and the bogus offer letter to Christian

Milton, a senior vice-president, at AIG. The contract for the first tranche of the LPT was

executed by the parties on or about March 8, 2001.

III. Gen Re’s Executives Structure and Implement the Pre-Payment of the Premium Fee

24. On September 15, 2001, Gen Re SE #1 advised Napier that he wished to

be kept informed of any important matter involving AIG. On September 28, 2001, the contract

for the second tranche of the LPT was executed by the parties. As of this time, CRD had not paid

AIG either the purported $10 million premium fee and had not received the $5 million

accommodation fee, because the parties had not determined how AIG would return the $10

million to Gen Re. Certain of Gen Re’s then executives understood the need to structure a

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transfer of funds for AIG’s prepayment of the premium fee and AIG’s payment of the

accommodation fee that would not disclose any link to Gen Re’s purported payment of the $10

million “premium” fee for the LPT.

25. In December 2001, Gen Re and AIG devised a method for AIG to pre-

fund the premium fee that Gen Re purportedly “owed” AIG under the terms of the contracts and

to pay Gen Re the $5 million accommodation fee. Garand informed certain of Gen Re’s then

senior management that the undisclosed pre-payment of the premium fee and the accommodation

fee would be accomplished by using the balance of funds from an unrelated agreement between

Gen Re and one of AIG’s subsidiaries, HSB. This agreement would be unwound and leave Gen

Re holding a positive balance from the HSB deal of approximately $31 million in funds. Gen Re

would transfer to CRD some of the HSB balance to pre-fund CRD’s payment of the two percent

premium to NUFIC and to pay CRD its portion of the $5 million accommodation fee (which Gen

Re was sharing with CRD). At AIG’s request, an additional $9.1 million of the HSB balance

would be transferred to NUFIC rather than HSB. The remainder of the balance, approximately

$7.5 million, would be sent to HSB.

26. On December 28, 2001, Gen Re SE #1 authorized the wire transfer of

$12.6 million in funds to CRD. The sum represented the prepayment of the two percent premium

of $10 million that CRD would forward to NUFIC under the terms of the LPT and CRD’s half of

the 5 million fee, with interest. Gen Re SE #1 authorized the wiring of funds based on another

contract in which Gen Re purported to reinsure CRD for up to $13 million in loss for a premium

of $400,000. CRD thereafter claimed losses to the full coverage against Gen Re, thereby

providing pretext for the transfer of $12.6 million (the amount of reinsurance coverage minus the

premium) from Gen Re to CRD. Had someone unfamiliar with the true details of the transaction

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looked at the documents, the effect would have been to conceal the true purpose of the transfer of

funds from Gen Re to CRD.

27. To facilitate the wire transfer of $9.1 million from Gen Re to NUFIC, an

additional reinsurance contract with no possibility of loss was created between Gen Re and

NUFIC. Gen Re SE #1 was provided this contract, and pursuant to it authorized wire transfers on

December 28, 2001, to NUFIC in the amount of $9.1 million and to HSB for the remaining

amount of $7.5 million.

IV. Gen Re Fails to Disclose the LPT

28. In 2002, Gen Re SE #1 sent Gen Re SE #2 to CRD’s offices in Dublin,

Ireland, to inventory transactions that might pose legal, regulatory, or reputational risk. On a

scale of one to ten, with one being the highest risk and 10 being the lowest risk, the inventory

review rated the LPT as a two. In connection with the review, Gen Re SE #2 made a

handwritten notation that there was a “hidden letter” associated with the LPT.

29. In or around July 2002, certain members of then senior management at

Gen Re and AIG discussed the possibility of commuting one or both of the two LPT contracts. In

July and August 2002, Gen Re SE #1 informed certain then senior executives that he personally

would communicate with AIG’s senior management regarding the LPT and oversee the future of

the LPT. Gen Re SE #1 ultimately decided against asking AIG to commute the transaction in

2002. The transaction remained in effect through 2004, when one tranche was commuted by the

parties. Gen Re’s failure to disclose the transaction prior to 2005 assisted AIG in falsely

inflating by $500 million its loss reserves for general insurance that were reported in its financial

statements through 2004.

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V. Actions By Gen Re SE#1 With Respect to the LPT in Late 2004

30. In October 2004, AIG informed Gen Re that it wanted to commute one

tranche of the LPT. Gen Re SE #1 initially informed another Gen Re senior executive that he did

not want to involve the legal department in reviewing the commutation.

31. In early November 2004, a Gen Re senior executive advised Gen Re SE

#1 that Houldsworth should be terminated because of concerns about Houldsworth’s integrity.

Gen Re SE #1 objected to doing so at the time, stating that if Houldsworth were terminated, it

might cost the company significant money.

32. On another occasion, when that same Gen Re senior executive asked Gen

Re SE #1 about the LPT because of that executive’s concern about the propriety of the

transaction, Gen Re SE #1 denied knowledge of its terms. Gen Re SE #1 later told that same Gen

Re senior executive that he knew the LPT was an accommodation to AIG.

33. On November 22, 2004, AIG and Gen Re commuted the first tranche of

the LPT.

VI. Disclosure of the Fraud

34. In or about January 2005, counsel for Gen Re telephoned representatives

of the Securities & Exchange Commission, the Department of Justice, and the New York

Attorney General’s Office regarding the LPT, and shortly thereafter met with government

officials to disclose facts regarding the LPT transaction. This disclosure was of assistance to the

decision to issue a subpoena to AIG for specific information about the LPT. Since that time,

Gen Re, including its then recently hired general counsel, has fully and unconditionally

cooperated in the government’s investigation and prosecution of the LPT matter.

35. On or about February 14, 2005, AIG disclosed that it had received a

subpoena from the SEC relating to finite reinsurance activities. Subsequently, on February 18,

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2005, the Wall Street Journal, in an article admitted in part as GX 244A in the related federal

criminal trial in United States v. Ferguson et al., 06-137 (D. Ct. 2006), reported about the

possibility of a transaction between AIG and Gen Re that was designed to artificially increase

AIG’s loss reserves. On March 14, 2005, the New York Times, in an article admitted in part as

GX 248A in the related federal criminal trial in United States v. Ferguson et al., 06-137 (D. Ct.

2006), reported that AIG’s Board of Directors was examining the role of AIG’s senior

management in the transaction. During the period from February 14, 2005 to March 15, 2005,

AIG’s stock price fell approximately thirteen percent, from $71.49 per share to $61.92 per share.

36. As a consequence of the unlawful LPT scheme perpetrated by AIG and

Gen Re’s senior management, the United States District Court that presided over the criminal

case of Gen Re’s former executives determined that, for purposes of calculating the sentencing

guidelines, AIG’s shareholders lost approximately $544 million to $597 million.

37. On May 31, 2005, AIG issued restated financial statements for the fiscal

years 2000 through 2003. In its restatement, AIG concluded that insufficient risk was associated

with the LPT and that the LPT should not have been accounted for as reinsurance. AIG restated

its total loss reserves for Q4 2000, for fiscal years 2001 through 2003, and for the first three

quarters of 2004 to adjust for the false inflation of its loss reserves caused by the LPT.

38. There are other matters known to the parties that are not included in this

Agreed Statement of Facts because they are not relevant to the purpose of this Statement of Facts

or to the agreement between the Government and Gen Re which is entered into in connection

with this Statement of Facts.

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