Former executives face life in jail after $544m case

See analysis: Slippery times for AIG

Five former insurance executives may be sentenced to life in prison after a US federal judge ruled AIG shareholders lost at least $544m (£343m) because of financial manipulation.

The case is unrelated to the subprime losses that led to the Federal Reserve’s $85bn rescue package, but the ruling is another blow to the insurer.

Four former executives of General Re and one former executive of AIG were originally convicted in February of conspiracy, securities fraud, mail fraud and making false statements to the US Securities and Exchange Commission.

The ruling by Judge Christopher Droney last Friday means the five could face life in prison, but a probation report recommended a sentence of 14 to 17 years for each defendant. A sentencing date has yet to be decided.

Prosecutors said the five participated in a scheme under which AIG secretly paid General Re to take out reinsurance policies with AIG, helping to prop up its stock price and inflate reserves.

The five – Ronald Ferguson, Christopher Garand, Robert Graham and Elizabeth Monrad, formerly of General Re, and Christian Milton, previously of AIG – claim there was no loss to investors.

Meanwhile, AIG has obtained more government help by tapping into the Federal Reserve’s commercial paper programme – a type of short-term loan.

The US insurer has registered to access about $20.9bn from the programme so it can pay back some of its original loan from the Fed.

The commercial paper programme has less harsh terms than the government bail-out and may give AIG more time to gain a decent price for its assets.

Some of AIG’s most prized assets are in its Asian division, with Prudential among the companies expressing an interest in the operation.

Fred Langhammer, an AIG director, resigned last week.

The insurer stated no reason for Langhammer’s departure from the board in a filing with the Securities and Exchange Commission.