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* Ex-Gen Re CEO, others had won reversal of convictions
* Transaction said to inflate AIG's loss reserves
* Talks on "global resolution" are ongoing
* New trial remains scheduled for January 2013
By Jonathan Stempel
May 25 (Reuters) - Four former executives at Berkshire Hathaway Inc's General Re Corp and one at American International Group Inc are in talks to settle a long-running criminal case accusing them of engineering a reinsurance transaction that fraudulently boosted AIG's loss reserves.
The talks were disclosed in a Thursday court filing, nearly 10 months after the 2nd U.S. Circuit Court of Appeals in New York overturned the defendants' convictions, citing errors by the judge handling their six-week trial in 2008.
The General Re defendants include former Chief Executive Ronald Ferguson, former Chief Financial Officer Elizabeth Monrad, former Senior Vice President Christopher Garand and former Assistant General Counsel Robert Graham. The AIG defendant is former Vice President Christian Milton. All had been scheduled to be retried in January 2013.
Prosecutors had accused the defendants of engineering a sham transaction in 2000 that let AIG inflate its loss reserves by $500 million without transferring risk.
That transaction helped lead to the 2005 ouster of AIG's longtime chief executive, Maurice "Hank" Greenberg.
"The parties have been, and continue to be, engaged in discussions concerning a potential global resolution of this matter," lawyers for the defendants said in a joint filing with the U.S. District Court in Hartford, Connecticut. "The parties are working diligently to determine whether such a resolution may be reached."
U.S. District Judge Vanessa Bryant on Friday agreed to delay some pretrial proceedings in light of the settlement talks. The office of U.S. Attorney David Fein agreed to the delay, the court filing shows. A trial remains scheduled for Jan. 22, 2013.
Tom Carson, a spokesman for Fein, declined to comment. Ferguson's lawyer Alfred Pavlis, Monrad's lawyer Reid Weingarten, Garand's lawyer Robert Cleary, Graham's lawyer Alan Vinegrad and Milton's lawyer Thomas Green did not immediately respond to requests for comment.
In overturning the convictions, the 2nd Circuit said presiding judge Christopher Droney erred in admitting data suggesting that the transaction caused a 12 percent decline in AIG's stock price in early 2005, saying other factors could have fueled the drop. It also said Droney did not properly instruct jurors on how to decide whether fraud occurred.
Droney had sentenced Milton to four years in prison, Ferguson to two years, Monrad to 1-1/2 years, and Garand and Graham to one year each. They were freed on bail.
Former General Re executives John Houldsworth and Richard Napier pleaded guilty in the case and received probation.
Warren Buffett, Berkshire's chief executive, was questioned by investigators but not accused of wrongdoing. General Re is based in Stamford, Connecticut and Berkshire in Omaha, Nebraska.
Droney now sits on the 2nd Circuit, having been promoted in December.
The reinsurance transaction took place well before AIG in 2008 and 2009 accepted $182.3 billion of taxpayer bailouts. The government still owns a majority of the New York-based insurer.
Greenberg, 87, this month sought permission to ask New York state's highest court to throw out a 2005 civil fraud lawsuit brought by then-New York Attorney General Eliot Spitzer accusing him of structuring fraudulent transactions, including the General Re transaction, to hide AIG losses.
The case is U.S. v. Ferguson et al, U.S. District Court, District of Connecticut, No. 06-cr-00137. (Reporting By Jonathan Stempel in Toronto; Editing by Tim Dobbyn)