Tesser Ryan Blog

Second Circuit Court of Appeals Reverses Convictions in High-Profile Gen Re-AIG Fraud Case

By Lewis Tesser, Partner, and Timothy Nolen, Associate, of Tesser, Ryan & Rochman, LLP

In a recent case, the Second Circuit Court of Appeals vacated the convictions of five corporate executives charged in connection with inflating AIG’s stock price. The case involved issues of criminal law, constitutional law, securities law, evidence and appellate practice.

The case, United States v. Ferguson, 2011 U.S. App. LEXIS 15811 (2d Cir. August 1, 2011), involved the CEO of AIG and four Gen Re executives who had been convicted of conspiracy, mail fraud, securities fraud and making false statements to the SEC. The convictions centered on an agreement between the CEO of AIG and the CEO of Gen Re to form a reinsurance transaction in order to inflate AIG’s stock price. Chief Judge Jacobs’ opinion for the Court held that the district court abused its discretion by allowing AIG stock price data into evidence. The Court noted that the stock price charts were prejudicial because, although they demonstrated that the stock price fell after news of the reinsurance transaction was released, various other allegations of impropriety also may have caused a drop in the share price. Additionally, the Court found that the District Court’s jury instruction, which asked whether the defendants “willfully caused” the illegal act, did not sufficiently instruct the jury to make a finding regarding causation. Accordingly, the convictions were reversed.

Ferguson provides an example of the complex issues regarding evidence and the sufficiency of jury charges which are often pivotal in white collar criminal defense. At Tesser, Ryan & Rochman, our attorneys’ experience in both criminal and business litigation allows us to advise our clients effectively in preparing for white collar criminal proceedings.

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