Second Circuit Opinion on Derivative Liability (8/20/11)

I write today on a fascinating recent decision from the Second Circuit in a nontax case. United States v. Ferguson, ___ F. 3d ___, 2011 U.S. App. LEXIS 15811 (2d Cir. 2011). The opinion is here.  The opening paragraph introduces the case as follows:

This criminal appeal arose from a "finite reinsurance" transaction between American International Group, Inc. ("AIG") and General Reinsurance Corporation ("Gen Re"). That transaction (the "Loss Portfolio Transfer," or "LPT") reallocated risk in a way that shored up AIG's flagging loss reserves, which were feared to be dragging down its stock price. Finite reinsurance transactions, which entail some (usually low) risk, are acceptable accounting measures in the insurance industry, and have their uses; but in this instance it is charged that the transaction entailed no risk at all, and was a fraud. The defendants, four executives of Gen Re and one of AIG, appeal from judgments entered in 2008 and 2009 by the United States District Court for the District of Connecticut (Droney, J.), convicting them of conspiracy, mail fraud, securities fraud, and false statements made to the Securities and Exchange Commission ("SEC"). They were sentenced principally to prison terms ranging from one to four years, and are free on bail pending this appeal.

I write principally because of the Court's discussion of the theories of vicarious liability. I have previously discussed those theories in various blogs can be viewed by clicking on the key words that I assign to this page. (I am also currently returning soon to my draft article on this subject which I hope to wrap up soon and will post to a blog at some time.)
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