May 20 (Bloomberg) -- Former American International Group Inc. Chief Executive Officer Maurice ``Hank'' Greenberg said he did nothing wrong in the reinsurance transaction with Berkshire Hathaway Inc.'s General Re Corp. that led to the conviction of five former executives.

Greenberg, 83, responded today to a ruling by U.S. District Judge Christopher Droney that implicated him in a case in which the executives were found guilty in February of participating in a fraud to boost loss reserves at AIG. The defendants turned to fraud ``to get the deal done'' after they were unable to complete the legitimate transaction requested by Greenberg, his spokesman Glen Rochkind said in a statement today.

Greenberg, who led New York-based AIG for 38 years before being replaced in 2005 amid accounting and sales probes, hasn't been charged and was an unindicted co-conspirator in the case, Assistant U.S. Attorney Eric Glover said in court on February 11. The judge's comments about Greenberg were part of a ruling made last week denying motions by the defendants, including former General Re CEO Ronald Ferguson, for a new trial.

Evidence presented by the government was ``sufficient'' to lead a jury to conclude that the conspiracy began with a phone call by Greenberg, said Droney in his ruling.

``Starting with Greenberg's Oct. 31, 2000, phone call to Ferguson, there was an agreement to carry out a transaction to artificially inflate AIG's loss reserves and deceive AIG's investors about the amount of the company's loss reserves and the quality of its earnings,'' Droney wrote in the May 15 ruling from federal court in Hartford, Connecticut.

Insurance Reserves

The deal between AIG and General Re arose after AIG said on Oct. 26, 2000, that premiums increased in the third quarter of that year as reserves for claims fell by $59 million. AIG, the world's largest insurer by assets, dropped 6 percent that day in New York Stock Exchange trading. Five days later, Greenberg asked Ferguson for help with AIG's loss reserves.

``Even though calculating loss reserves usually requires an actuarial assessment after the fact,'' Judge Droney wrote, ``Greenberg specified the amount of loss reserves he wanted from the deal during that call.''

General Re agreed in writing to transfer $600 million in policies and pay $500 million in premiums, making it appear AIG could lose $100 million.

Droney presided over the trial of the executives in February. Ferguson was convicted of fraud along with former General Re Chief Financial Officer Elizabeth Monrad; Christopher Garand, a former senior vice president at General Re; former General Re Assistant General Counsel Robert Graham; and Christian Milton, AIG's former head of reinsurance.

Ethical Conduct

``Mr. Greenberg has always acted ethically, responsibly and legally in all of his business and personal actions,'' Rochkind said in the statement.

The Wall Street Journal reported the judge's ruling earlier today.

The ruling ``had only to do with the five defendants in the government's case,'' Rochkind said. ``Mr. Greenberg was not a defendant, had no opportunity to defend himself or present evidence in his defense, and had no standing before the court.''

Monrad's lawyer Reid Weingarten, Graham's attorney Alan Vinegrad, Garand's lawyer Richard Brown and Milton's attorney Frederick Hafetz didn't immediately return calls. Ferguson's lawyer, Cliff Schoenberg, declined to comment.

Prosecutors said secret oral side agreements corrupted the companies' contract. Under unwritten terms, AIG faced no losses, rebated the $10 million in premiums advanced by General Re and paid a $5 million fee to General Re, prosecutors said.

Prosecutors said AIG fraudulently booked $500 million in loss reserves, implying a risk of loss, when it should have booked a no-risk deposit, as General Re did. AIG later reversed the transaction and agreed in 2006 to pay $1.64 billion to settle probes of sales and accounting practices.

Eliot Spitzer

Martin Sullivan succeeded Greenberg as CEO in March 2005. Two months later, then-New York Attorney General Eliot Spitzer sued AIG and Greenberg, accusing him of ordering improper transactions to hide losses and inflate reserves.

Greenberg denies any wrongdoing in the case, which is still pending. Spitzer dropped portions of the lawsuit in 2006 that included four other allegations tied to the investigation.

The case is: USA v. Ferguson et al U.S. District Court for the District of Connecticut, Case No. 3:06-cr-00137-CFD

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net

Last Updated: May 20, 2008 12:47 EDT