AIG's Milton Sentenced: Considering the Whole Man

After AIG executive Chris Milton was convicted of securities fraud and other offenses related to the now notorious AIG/GenRe finite reinsurance transaction last year, his attorney pleaded to U.S. District Court Judge Christopher Droney that he "weigh the whole man" as he decided Milton's sentence. It was the whole man that came to my mind when I heard the news that Milton had been sentenced to four years in prison.In thousands of news reports and blog posts Chris Milton emerges as just another white-collar criminal, a greedy suit with a sense of entitlement out of proportion to his scruples. Innumberable reader comments characterize him as one of those larcenous villains who caused the financial trouble we're in, and who are too seldom called to account. Such opinions are starkly at odds with "the whole man" in Milton's case.

Early misfortunes are no excuse for later misdeeds. Thus, I could understand observers dismissing as an irrelevant sob story Milton's attorney's account that the executive grew up in harsh circumstances: his mother had polio and his father was partly disabled; he "was a star student in high school but he was unable to afford university [and] started out in finance filling out credit slips in a tailor's shop." These details are irrelevant to the case against Milton, but they are also at odds with his portrayal as just another wealthy parasite.

I would never have written this if I hadn't met Chris Milton some years ago. Speaking in an accent that betrayed his modest London origins, he told me that he had known since he was 18 years old that he had wanted to be an actuary. At a critical moment, someone advised Milton against that ambition on the grounds that success was impossible without an Oxbridge education-and that was never going to happen. Indeed it never did, but Milton succeeded all the same, and to a very high degree.

I talk with many distinguished executives, but few of the conversations remain with me like that one did. The lasting impression was due in part to the contrast between Milton's affable, unpretentious manner and his impressive physical stature. But mostly it was the almost ascetic devotion to his arcane profession, and the joy it clearly gave him. This was not a man who got ahead through connections, rhetoric or sharp practice; this was a person who was not only evidently decent, but who had remarkable talent and took great pleasure in its disciplined exercise.

It would take more expertise than I have in both the law and finite reinsurance transactions to confidently say that Milton's conviction was wrong. But I suspect that his actions were unfairly characterized by the prosecution, and that what he did was neither very unusual nor generally recognized as criminal in nature.

The San Francisco Chronicle reports that in reply to the defense's assertion that Milton did not act specifically to enrich himself Assistant U.S. Attorney Ray Patricco claimed that Milton "had a financial motive because his substantial deferred compensation plan was tied to AIG's stock price." While the judge agreed that Milton surely knew he was perpetrating a "scam," he apparently rejected Patricco's tenuous argument on motive. The judge said, according to the Business Insurance article linked earlier, that "unlike many other white collar criminals, Mr. Milton was not motivated by personal gain."

That much is to the Judge Droney's credit. But if Milton believed he was doing his job rather than deliberately lining his pockets, where is the mens rea? Yes, he knew the nature of the transaction. But if such transactions had been tolerated in the past, Milton may reasonably have felt it was his duty to use what means were available to serve his company's interest. Given such considerations, no man should be subject to imprisonment for doing what appeared to be acceptable practice, even if it did not serve the highest standard of transparency. No man should be deprived of his liberty without knowing that he acted criminally.

Perhaps some might argue that the AIG/GenRe finite reinsurance transaction was egregious in some respects, and that in this instance a man capable of and accustomed to playing by the rules departed from them. If that is true, his conviction is a tragedy. If it's not, it's a travesty.Perhaps some might argue that the AIG/GenRe finite reinsurance transaction was egregious in some respects, and that in this instance a man capable of and accustomed to playing by the rules departed from them. If that is true, his conviction is a tragedy. If it's not, it's a travesty.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio