(Bloomberg) ? A former AIG executive, once based at the company's Bermuda office, and three former executives of Berkshire Hathaway Inc.'s General Re unit were indicted in an accounting probe of AIG, a person familiar with the matter said.

A federal grand jury in Virginia charged Ronald Ferguson, 63, General Re's former chief executive officer, Elizabeth Monrad, 51, the company's former chief financial officer, and Robert Graham, its former assistant general counsel, with conspiracy to commit fraud, said the person, who declined to be identified because the indictments haven't been announced.

Christian Milton, who had overseen reinsurance at New York-based AIG, and in decades past was based in Bermuda, was also charged, the person said.

The indictments may trigger guilty pleas, giving prosecutors leverage to build cases against others involved in a reinsurance transaction between Stamford, Connecticut-based General Re and AIG dating back to 2000, said Jacob Frenkel, a former federal prosecutor.

Regulators probing the deal questioned Berkshire Chairman Warren Buffett and led to AIG's ouster of CEO Maurice Greenberg last year.

"Sometimes it takes the filing of an indictment to induce a plea and cooperation," said Frenkel, who now practices law at Shulman, Rogers, Gandal, Pordy & Ecker in Rockville, Maryland. Investigators will probably "continue to climb up the ladder."

The US Securities and Exchange Commission will simultaneously sue the former executives for aiding and abetting securities fraud, the person said. Frank Shults, a spokesman for US Attorney Paul McNulty in Alexandria, Virginia, didn't return phone calls seeking comment, and SEC spokesman John Nester declined to comment.

Frederick Hafetz, Milton's attorney, said he hadn't been notified of an indictment.

If Milton is charged, "he will vigorously contest the charges and is confident that he will be exonerated at trial," he said.

Monrad and her lawyer, Paul Shechtman, didn't return phone calls, nor did Ferguson attorneys Douglas Koff or Clifford Schoenberg. Stanley Twardy, a General Re lawyer, declined to comment, as did Howard Opinsky, a spokesman for Greenberg. Graham couldn't be reached for comment. The Wall Street Journal reported the indictments late yesterday.

Joseph Brandon, General Re's current CEO, is also under investigation and was notified by the SEC in September that he may be sued by the agency.

Brandon, 46, could face civil penalties or be barred from serving as an officer of a public company, Omaha, Nebraska-based Berkshire said at the time.

State and federal prosecutors discovered the transaction during an industrywide investigation of instances when insurers disguise what are essentially low-cost loans as insurance to get favourable accounting treatment.

A probe of the reinsurance deal led to a broad accounting inquiry at AIG last year, ultimately prompting the world's largest insurer to restate past earnings by $3.9 billion, or 10 percent.

AIG said labelling the contract as reinsurance allowed it to inflate its reserves for claims by $500 million.

General Re, the largest US reinsurer, accounted for it as a series of deposits and loans. According to Richard Napier and John Houldsworth, two former General Re executives who pleaded guilty in the case in June, Greenberg initiated the deal with a phone call to Ferguson in late 2000 because he wanted to appease analysts who were concerned about AIG's reserve levels.

Ferguson and Monrad knew that AIG meant to misuse the contract to distort its finances, the guilty pleas said.

Milton was at a meeting in late 2000 in which AIG's intention was discussed, the SEC said in a related complaint.

The SEC, Department of Justice and New York Attorney General Eliot Spitzer interviewed Buffett, the 75-year-old billionaire investor, in April and Spitzer later called him a "cooperative witness."

Besides Brandon, Graham, Monrad and Ferguson were among executives of Stamford, Connecticut-based General Re notified of possible SEC suits last year.