The chief executive in 2000 of IFSC-based Cologne Re helped create "false documents" in that year to cover up fraudulent deals for $500 million between its parent General Re (GenRe) and the giant insurer AIG, according to court documents.
In a civil action filed in the US courts against AIG and former executives in the group, New York attorney general Eliot Spitzer implicated Cologne Re in "sham contracts", secret payments and false paper trails designed to hide the true nature of the illegal deals between the groups.
Mr Spitzer alleged that Cologne Re entered fraudulent transactions in 2000 and 2001 with an AIG subsidiary that were designed to "falsely inflate" AIG's reserves.
He alleged the scheme was initiated by AIG's then chief executive, Maurice "Hank" Greenberg, who was ousted from the group earlier this year as regulators deepened their scrutiny of his actions.
The lawsuit alleged that Cologne Re's then chief executive in Dublin, John Houldsworth, initiated false correspondence to cover up the scheme and embellish the "fiction" behind the deal.
Mr Houldsworth, who is chief property and casualty underwriter for international finite reinsurance, has been on "administrative leave" from the company since last week. He is facing separate action initiated by the US Securities & Exchange Commission.
After a separate inquiry last year by the Australian financial regulator, Mr Houldsworth was among six GenRe executives barred from working at a senior level in the Australian insurance industry.
Cologne Re is ultimately owned by Berkshire Hathaway, a conglomerate controlled by businessman Warren Buffett.
Cologne Re chief executive James Maher did not return a call last night. Neither did a spokesman for Berkshire Hathaway.
Mr Greenberg was named in the action by Mr Spitzer, as was Howard Smith, the group's former chief financial officer. New York insurance superintendent Howard Mills is also party to the action.
"The entire AIG-GenRe transaction was a fraud. It was explicitly designed by Greenberg from the beginning to create no risk for either party - AIG never even created an underwriting file in connection with the deal," the lawsuit said.
"Ultimately, AIG's subsidiary, National Union, and GenRe's subsidiary, Cologne Re of Dublin, entered the two contracts," the lawsuit stated.
