Former General Re associate general counsel Robert Graham could spend the rest of his life in jail after a federal jury convicted him and four other defendants for aiding a sham deal with American International Group (AIG), writes Corporate Counsel magazine.

Graham was found to have played a key role in a fraudulent reinsurance deal in 2000 between Gen Re – a subsidiary of Warren Buffett's Berkshire Hathaway holding company – and regular customer AIG, designed to make AIG appear in better financial shape than it really was.

Graham, represented by Covington & Burling litigation partner Alan Vinegrad, was found guilty of securities fraud, mail fraud, conspiracy and making false statements to the Securities & Exchange Commission alongside Gen Re's former chief executive, chief financial office and senior vice president, as well as the former head of reinsurance at AIG.

Graham worked at Gen Re for around nine years before resigning in 2005. He faces up to 210 years in prison, with sentencing scheduled for 15 May. All of the defendants intend to appeal their convictions.

Prosecutors alleged that Graham drafted contracts in which Gen Re appeared to pay $500m (£252.2m) to AIG for reinsurance. But in reality, AIG had no obligation to pay out any liabilities and the transaction only served to increase AIG's loss reserves.

Rather than prevent the deal, Graham was found to have created a paper trail designed to deceive auditors.

Both the prosecution and the defense hinged their arguments on an e-mail that Graham sent on 22 December, 2000, to then-general counsel Timothy McCaffrey, warning that insurance and securities regulators could "attack" the deal.

"Our group will book the transaction as a deposit," Graham wrote, adding: "How AIG books it is between them, their accountants and God."

Prosecutors said the email proved Graham knew the deal was a sham – a claim denied by Graham and his attorney, who insisted that his client had acted in good faith.

McCaffrey, who left Gen Re in 2005, was named by the government as an unindicted co-conspirator. McCaffrey says that he would have testified as a defense witness if he had been granted immunity. But prosecutors denied the request.

The case highlights the risks faced by corporate counsel as regulators adopt an increasingly aggressive stance, with at least 25 in-house lawyers having been prosecuted since the Sarbanes-Oxley Act took effect in 2002.

Corporate Counsel is a US sister title of Legal Week.

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