The former chief financial officer of General Re was sentenced to 18 months in prison for her role in a fraudulent scheme to manipulate American International Group‘s financial statements.

Elizabeth A. Monrad, 54, of New Canaan, Conn., was also sentenced to three years of supervised probation and ordered to pay a $250,000 fine.

A federal jury found Monrad, who was General Re’s CFO from June 2000 to July 2003, three other former General Re executives and an AIG executive guilty in February 2008 of conspiracy, securities fraud, false statements to the U.S. Securities and Exchange Commission and mail fraud.

In January, Ronald E. Ferguson, 66, of Fairfield, Conn., Gen Re’s chief executive officer from 1987 through September 2001, was sentenced to two years in prison and ordered to pay $200,000 in fines in the same case.

The case involving AIG predated and is not connected to the issues leading to its receipt of nearly $170 billion in federal money this year.

Prosecutors said Ferguson, Monrad and co-defendants Robert D. Graham and Christopher P. Garand, all former Gen Re executive officers, and Christian M. Milton, a former senior AIG executive officer, engaged in a scheme to falsely inflate AIG’s reported loss reserves, a key indicator of financial health to insurance industry analysts and investors. According to trial evidence, the fraud was carried out through the use of two sham reinsurance transactions between subsidiaries of AIG and Gen Re in response to analysts’ criticism of a $59 million decrease in AIG’s loss reserves for the third quarter of 2000, prosecutors said.

The two sham transactions increased AIG’s loss reserves by $250 million in the fourth quarter of 2000 and $250 million in the first quarter of 2001, masking a declining trend in loss reserves in the face of premium growth. AIG restated the transactions at issue in filings with the SEC in May 2005.

Evidence presented at trial established that when the investigation was disclosed to investors by AIG and through various media outlets between Feb. 14, 2005, and March 14, 2005, shares of AIG stock dropped from $73.12 to $61.92.

On Oct. 31, the court found that AIG’s shareholders lost between $544 million and $597 million as a consequence of the defendants’ fraudulent scheme.