The Lord of Regulation goes after the Oracle of Omaha

buffett way.jpgAlmost on cue, this Wall Street Journal article($) is reporting that Warren Buffett, the famed investor who is chairman and CEO of Berkshire Hathaway Inc., will be questioned by regulators next month over his involvement in the transaction between Berkshire’s General Re insurance unit and American International Group Inc. that has led to the resignation of Maurice “Hank” Greenberg as AIG’s chairman and CEO.
Here are the previous posts on the probe into AIG and Berkshire, and a NY Post article from last week that reported on a leak from New York Attorney General Eliot Spitzer‘s office that Mr. Buffett was not a target of the investigation.
H’mm. I guess Mr. Spitzer has changed his mind.
Mr. Buffett’s interview is scheduled for April 11, a day before Mr. Greenberg’s interview unless he has decided to assert his Fifth Amendment privilege in light to his resignation from AIG. At this point, Mr. Spitzer’s office and the Securities and Exchange Commission are handling the probe, although Justice Department lawyers will also be present at both interviews.
Mr. Buffett will be questioned specifically about his involvement in a 2000 reinsurance transaction between AIG and General Re that regulators contend allowed AIG to boost its financial position improperly. The transaction shifted half a billion of expected claims to AIG from General Re along with a commensurate amount of premiums. AIG booked the premiums as revenue and then added $500 million to its reserves to account for its obligation to pay the claims at a time when market analysts were questioning whether AIG had adequate liability reserves. Regulators contend that the premium was designed to ensure that AIG was not at risk and, therefore, that the half billion was improperly booked as premium revenue. For its trouble, General Re received a $5 million commission on the deal and now even more investigative scrutiny into similar transactions with other companies.

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