A former executive at Berkshire Hathaway's General Re insurance unit pleaded guilty yesterday to helping American International Group (AIG...

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ALEXANDRIA, Va. — A former executive at Berkshire Hathaway’s General Re insurance unit pleaded guilty yesterday to helping American International Group (AIG) concoct a sham transaction that made AIG’s finances appear better than they were.

As part of a plea bargain, John Houldsworth is aiding a Justice Department investigation of the companies. He faces up to five years in prison on the single count of conspiracy to file false financial reports.

The plea came a day after Maurice Greenberg resigned from the board of AIG. The 80-year-old Greenberg, who had built AIG into the nation’s biggest insurance company, had previously stepped down as chairman, CEO and president. He was accused of orchestrating an accounting scheme to falsely burnish the company’s financial picture.

Houldsworth, 46, who was CEO of a General Re unit called Cologne Re Dublin, admitted in federal court that he helped create a phony deal that made it appear AIG — his company’s top customer — had boosted its loss reserves by $500 million in late 2000 and early 2001.

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Houldsworth declined to comment after yesterday’s hearing. General Re had no immediate comment on the plea, company Vice President James Heslin Jr. said.

Prosecutor Thomas Hanusik said Houldsworth has already met with investigators four times, and more meetings are expected.

Houldsworth also faces charges filed Monday by the Securities and Exchange Commission in federal court in New York City alleging similar misconduct.

AIG and Gen Re are major players in the reinsurance industry, which provides insurance to insurers.

According to court documents, AIG had been concerned about insufficient reserves to cover potential losses and approached Gen Re to facilitate a deal that would increase its loss reserves on paper.

Prosecutors have said the deal between the two companies had no substantive value and was designed to cosmetically alter AIG’s books. Gen Re received a $5.2 million fee to arrange the sham transactions.

Berkshire Hathaway, the Omaha-based holding company controlled by billionaire investor Warren Buffett, said Monday it had fired Houldsworth after learning about the plea agreement.