Former MBIA Inc. chairman and chief executive officer David H. Elliott is in the cross-hairs of federal prosecutors, who are probing the circumstances that led to the world’s largest bond insurer to restate seven years of earnings, according to Bloomberg, citing people familiar with the matter.
The U.S. Attorney’s Office for the Southern District of New York is reportedly looking into whether Elliott approved a 1998 side deal to cover losses that should have been paid by another insurer. Elliott’s attorney, Steven Peikin of Sullivan & Cromwell, declined comment to the wire service.
“Any agreement that starts with the word ‘side’ is suspect,” said former federal prosecutor E. Lawrence Barcella Jr., now a defense lawyer at Paul, Hastings, Janofsky & Walker, according to Bloomberg. “The government, particularly the Southern District of New York, is being very aggressive across the board on these things.”
Elliott became chief executive in 1992 and chairman in 1994, according to Bloomberg, and retired from both positions in 1999.
Investigators also have evidence that former chief financial officer Julliette Tehrani was directly involved in the 1998 side agreement, reported Bloomberg. Tehrani resigned her position in September of that year to become a special assistant to then-chairman Elliott; she no longer works at MBIA, the wire service added.
In March, MBIA announced that it will restate its financials for the past seven years as a result of its accounting for two 1998 reinsurance agreements with Converium Re, previously known as Zurich Reinsurance North America. And last month, the insurer disclosed that the Securities and Exchange Commission may bring civil charges stemming from a reinsurance arrangement it made several years ago with a unit of the Pittsburgh-based Allegheny Health, Education, and Research Foundation