UPDATE 1-Former AIG exec sentenced to 4 years in prison

(Adds details, statement from Justice Department, Milton attorney not immediately available, bylines)

By Lilla Zuill and Martha Graybow

NEW YORK Jan 27 (Reuters) - A former executive at American International Group Inc (AIG.N) was sentenced to four years in prison on Tuesday for his role in a reinsurance deal that prosecutors said misled AIG investors.

Christian Milton, a former AIG vice president of reinsurance, and four former executives at Berkshire Hathaway Inc's (BRKa.N)(BRKb.N) General Re Corp business were found guilty last February of conspiracy and fraud.

At the center of the case was a finite reinsurance transaction with General Re that prosecutors said allowed AIG to improperly boost its loss reserves by $500 million in 2000 and 2001. The use of finite reinsurance, often misused to smooth financial results, has largely ended.

The U.S. Justice Department, reporting Milton's prison sentence, said the 61-year-old executive was also ordered to pay a $200,000 fine. His attorney could not immediately be reached for comment on the sentencing.

According to sentencing guidelines, Judge Christopher Droney of U.S. District Court in Hartford, Connecticut, could have sentenced Milton, of Wynnewood, Pennsylvania, to as much as 210 years in prison.

Milton is scheduled to report to federal prison on March 25, according to Thomas Carson, a spokesman for the U.S. Attorney's Office in Connecticut, which prosecuted the case.

Ronald Ferguson, General Re's former chief executive, was sentenced to two years in prison last month in the same case.

The other three defendants -- Elizabeth Monrad, who was General Re's former chief financial officer; Christopher Garand, a former General Re senior vice president and head of finite reinsurance operations in the United States; and former Gen Re general counsel Robert Graham -- still await sentencing.

Milton, vice president of reinsurance at AIG from about April 1982 until March 2005, currently works for C.V. Starr, a New York-based insurance and investment firm run by Maurice "Hank" Greenberg, a former AIG CEO.

Greenberg left AIG in 2005 after Eliot Spitzer, then the New York attorney general, filed a lawsuit against him and the company, alleging manipulation of financial results, including the General Re case.

AIG paid $1.6 billion to settle the charges in 2006. Greenberg has denied any wrongdoing and continues to fight civil charges. (Reporting by Lilla Zuill; editing by Jeffrey Benkoe and John Wallace)