Second Circuit Offers a Primer for Criminal Law Practitioners

Few cases in the past decade have been of greater value to federal criminal law practitioners than United States v. Ferguson, 2011 WL 3251464. As expected, the U.S. Court of Appeals for the Second Circuit rendered an erudite opinion with Chief Judge Dennis Jacobs writing for the panel, which was comprised of other members Judges Amalya Kearse and Chester Straub.¹ What we intend to do in this article is not write of the specifics of the opinion as it necessarily refers to the facts of the case; but rather, canvas the discussion of the legal points that emerged from the case. A short statement of the facts, nonetheless, is in order, but, once again, the real importance of the case is the way it provides a primer for counsel on what is or is not the law on many issues. A table of contents was provided by the court to assist the reader in digesting all of the many points that were covered.

The case involved transactions between AIG and the General Reinsurance Corporation (Gen Re) involving loss portfolio transfers (LPT) that had the effect of shoring up “AIG’s flagging loss reserves which were feared to be dragging down its stock price.” Loss reserves are liabilities on an insurer’s balance sheet that estimate projected claims on insurance contracts. Finite reinsurance transactions are acceptable accounting measures in the insurance industry. However, it was charged that the transfers were a fraud on the investing public, violative of the securities laws and other provisions of law. The essence of the charges was that there was a substantial likelihood that the facts relating to the LPT-related transaction would be important for a reasonable investor to know.