Berkshire Hathaway’s decision to roll over and provide government investigators anything they want in connection with the multiple investigations into the transactions between Berkshire General Reinsurance Corp. and American International Group, Inc. is starting to look like a very costly one.
This Wall Street Journal ($) article reports that federal prosecutors are examining whether Joseph Brandon, chief executive of General Re and a close confidant of Berkshire’s icon, Warren Buffett, played a role in the transaction between General Re and AIG that has spawned a cottage industry of investigations into General Re, AIG, and other companies that have engaged in similar “finite risk” structured finance insurance transactions. The 46 year old Mr. Brandon — who took over as General Re’s CEO in 2001 — is the highest-ranking executive at General Re to be investigated in the matter who is still employed at General Re.
A portion of the WSJ article describing the investigation underscores the absurd length to which the government will now go in its campaign to criminalize agency costs:

The fact that Mr. Brandon learned about Gen Re’s accounting for the AIG transaction as a loan rather than insurance around the time of the conversations with Mr. Buffett may not present problems for him in the eyes of regulators, people close to the situation say. But if investigators determine that Mr. Brandon also understood the purpose of the transaction for AIG and how AIG accounted for it, he might be vulnerable to charges, the people close to the inquiries say.

Stated another way, prosecutors appear to be suggesting that if Mr. Brandon was informed that the transaction was beneficial for AIG from an accounting standpoint, then he committed a crime.
It is simply impossible to square the foregoing theory of criminal liability with the following language of Chief Justice William Rehnquist in the Supreme Court’s recent Arthur Andersen decision:

We have traditionally exercised restraint in assessing the reach of a federal criminal statute, both out of deference to the prerogatives of Congress, . . . and out of concern that “a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.”