Six years ago, Elizabeth Monrad was at the top of her profession. She served as the CFO of TIAA-CREF, sat on the board of directors at Colgate-Palmolive, and was tapped for her expertise at various organizations, such as the Public Company Accounting Oversight Board.

Her stature changed dramatically in 2005 after regulators began asking questions about an allegedly fraudulent reinsurance deal made between her former employer, General Re Corp., and American International Group (AIG). The transaction began in 2000 as a way to bolster AIG’s loss reserves by about $500 million. The deal was not booked correctly under reinsurance accounting standards.

In 2009, after a six-week trial, Monrad was convicted along with four other executives (three who worked at Gen Re and one AIG employee) on charges of conspiracy, mail fraud, securities fraud, and making false statements to the Securities and Exchange Commission. She was sentenced to 18 months in prison.

However, Monrad has yet to serve any time. And she may be able to keep her freedom. Last week a U.S. appeals court vacated all five convictions, leaving it up to prosecutors to retry the defendants in the U.S. District Court for the District of Connecticut. A retrial could be difficult, based on the appeals court’s 77-page criticisms of the original case and the passage of more than a decade since the transaction in question was first devised. “Memories get dimmed,” says Ira Feinberg, Monrad’s attorney and a partner at Hogan Lovells.

At issue was a finite reinsurance transaction the companies called the loss portfolio transfer (LPT). It was designed to augment AIG’s loss reserves, which decreased by $59 million in the third quarter of 2000, and subsequently was penalized by analysts who view the number as a key metric for insurance companies. In 2005 AIG restated four years’ worth of earnings.

The appeals court took issue with two aspects of the case: some of the jury instructions and the prosecutors’ use of stock-price information that was misleading. The wording used by the lower court’s judge made it so the jury was able “to convict without finding causation,” according to the appeals court. In other words, the jury was not directed to consider whether Gen Re executives’ conduct caused AIG to misrepresent its financial condition. This was a key point of Monrad’s defense — that, as CFO at Gen Re, a role she held for three years, her focus was on her company’s accounting and not that of AIG’s. “She didn’t know how AIG was going to be accounting for the transaction,” says Feinberg. “That wasn’t her concern.”

Monrad’s fellow Gen Re defendants similarly tried to push off any responsibility for AIG’s accounting treatment. “How AIG books it is between them, their accountants, and God,” wrote defendant Robert Graham in a memo to his boss when he was legal counsel at Gen Re, according to court documents. Indeed, the two companies accounted for the same transaction differently: Gen Re booked the deal as a deposit while AIG accounted for it as reinsurance.

The jury could have been misled by a chart showing a 12% dip in AIG’s stock price between February and March 2005 that implied investigations into the LPT were solely to blame for the drop, according to the appeals court. At that time, AIG had other troubles, including allegations of bid rigging and earnings manipulation unrelated to the Gen Re transaction.

Last week’s opinion raises the bar for a retrial on other issues in the case as well. The appeals court noted the inconsistent testimony by Richard Napier, a key government witness who was a senior executive at Gen Re and pleaded guilty to charges similar to those levied at other executives. Chief Judge Dennis Jacobs wrote in his opinion that Napier “may well have testified falsely,” particularly about a meeting he claimed took place. Napier said Monrad told AIG’s CFO and controller at this meeting that Gen Re would book the LPT as a deposit, which would suggest that AIG officials could not later act surprised by Gen Re’s accounting treatment. “The government will doubtless approach Napier’s revised recollections with a more skeptical eye on remand,” wrote Jacobs.

The case received widespread attention when Warren Buffett, whose Berkshire Hathaway owns Gen Re, was said to have knowledge of the deal and could have been asked to testify (but ultimately did not). He was not charged. Neither was Maurice “Hank” Greenberg, who was CEO of AIG at the time.