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April 8, 2005

Did Buffett rat out AIG?

warren_buffett.jpgIn an extraordinary development in the unfolding criminal investigation of transactions between American International General, Inc. and Berkshire-Hathaway, Inc., this NY Times article reports that Berkshire chairman Warren Buffett -- in an effort to win leniency for Berkshire in an unrelated case -- directed Berkshire's lawyers several months ago to turn over documents describing the transaction between Berkshire unit General Re and AIG that is at the heart of the criminal investigation. Here are the previous posts on the AIG and Berkshire saga.

As a result of Mr. Buffett's peace offering, former AIG chairman and CEO Maurice "Hank" Greenberg is facing the prospect of giving a deposition next week to the Justice Department, Securities and Exchange Commission, Eliot Spitzer and the New York attorney general's office, and New York insurance regulators. In comparison, Mr. Buffett will merely be "interviewed" on Monday by the investigators, who consider him merely a witness in the AIG probe at this point.

According to the Times article and this similar Wall Street Journal ($) article, Mr. Buffett and Berkshire served up AIG and Mr. Greenberg on a platter to prosecutors in December when prosecutors were questioning Berkshire officials regarding General Re's transactions with Reciprocal of America, a failed Virginia-based insurer. The prosecutors are investigating whether General Re had helped Reciprocal disguise loans as reinsurance to hide losses from insurance regulators. Two Reciprocal executives have copped plea deals and began cooperating with investigators, which led prosecutors to inform Berkshire lawyers that General Re and Berkshire executives may face criminal charges in connection with their probe of Reciprocal. A couple of weeks later, the Times and WSJ report that, at Mr. Buffett's behest, Berkshire lawyers gave investigators documents regarding General Re's questionable transaction with AIG.

Sort of makes one feel warm and fuzzy about doing business with that American business icon, Warren Buffett, doesn't it?

Posted by Tom at April 8, 2005 5:29 AM |


I was wondering what you meant by "Sort of makes one feel warm and fuzzy about doing business with that American business icon, Warren Buffett, doesn't it?"
Do you mean that Warren Buffett was involved in the Enron like scam or that Warren Buffett will turn you in if he discovers you did something wrong, even if you work for or do business with his company?

Posted by: John at April 10, 2005 7:51 PM

One of Mr. Buffett's companies was involved in a complicated structured finance transaction with AIG. As is popular in this post-Enron era, the government is criminalizing in this news media these transactions -- all of which were approved by executives, attorneys and accountants on both sides of the transactions -- without so much as establishing that there is anything misleading with the transactions from a civil standpoint, much less that there is anything criminal about them.

That Buffett bowed to the pressure so easily should give pause to any executive that would consider entering into any type of structured finance transaction with Berkshire that an ambitious prosecutor might use as the basis for his or her appeal to the anti-business sentiments of a large part of the public and MSM.

Posted by: Tom K at April 11, 2005 9:12 AM

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