Berkshire Hathaway used the tried-and-true tactic of a late Friday afternoon news release in an attempt to generate the least amount of notice possible for its most recent quarterly earnings report.
However, in doing so, Berkshire raised eyebrows by disclosing that a current VP at its General Reinsurance Corp unit had received a “Wells” notice from the Securities and Exchange Commission, which means that the SEC is planning on filing civil charges alleging violations of federal securities laws. The Wall Street Journal ($) disclosed later in the weekend that the General Re VP is Rick Napier, and that the SEC is considering filing a complaint against Mr. Napier for assisting American International Group Inc. in allegedly accounting for a highly-publicized reinsurance transaction improperly. Moreover, inasmuch as Wells notices are usually sent out to all potential defendants to an SEC civil action, more General Re and AIG executives who were involved in the reinsurance transaction will probably receive such a notice soon.
Berkshire also disclosed that General Re and its former CEO, Ronald Ferguson, were sued along with AIG and several AIG executives in a recent class-action civil lawsuit filed in federal court in New York City. Mr. Ferguson was the CEO of General Re when Berkshire purchased the company in 1998. After several years of poor results, Mr. Ferguson stepped down as chief executive in 2001 and has been a consultant to Berkshire’s reinsurance businesses ever since. AIG’s former CEO Maurice “Hank” Greenberg allegedly contacted Mr. Ferguson in 2000 to arrange the reinsurance transaction that is now the subject of the multiple investigations.