The U.S. Securities and Exchange Commission announced that it filed an enforcement action against a former senior executive of General Re Corp. for his role in aiding and abetting American International Group Inc. in committing alleged securities fraud.

In the complaint filed today in federal court in Manhattan, the commission alleges that John Houldsworth and others helped AIG structure two sham reinsurance transactions which had, as their only purpose, to allow AIG to add a total of US$500 million in phony loss reserves to its balance sheet in the fourth quarter of 2000 and the first quarter of 2001. The transactions were initiated by AIG to quell criticism by analysts concerning a reduction in the company’s loss reserves in the third quarter of 2000, the SEC says. The case has yet to be proven.

However, without admitting or denying the SEC’s allegations, Houldsworth consented to the entry of a partial final judgment, which resolves all issues of liability against him but defers the determination of disgorgement and penalties until a later date. As part of his settlement, Houldsworth has agreed to cooperate fully with the commission in its continuing investigation.

In its complaint against Houldsworth, the commission alleges that he and others at Gen Re worked with their counterparts at AIG to fashion two sham reinsurance contracts between Cologne Re Dublin, a Gen Re subsidiary in Dublin, Ireland of which Houldsworth was the chief executive officer and an AIG subsidiary. The complaint charges that all parties understood from the beginning that they were engaged in an undertaking to create sham transaction documents for the sole purpose of allowing AIG to make false accounting entries on its books.

In addition to pledging his cooperation with the investigation, Houldsworth consented to the entry of a partial final judgment permanently enjoining him from future violations of these provisions, barring him from serving as an officer or director of a public company and deferring the determination of civil penalties and disgorgement to a later date. In addition, he agreed to an administrative order barring him from appearing or practicing before the commission as an accountant.