- The Washington Times - Sunday, April 10, 2005

ALBANY, N.Y. (AP) - Billionaire investor Warren Buffett is merely a witness who could “shed light” on transactions involving the former chief executive of insurer American International Group Inc., which is now at the center of federal and state probes, New York Attorney General Eliot Spitzer said yesterday.

Mr. Buffett, who heads Berkshire Hathaway, will meet today in New York with regulators as part of an investigation by Mr. Spitzer and the Securities and Exchange Commission into accusations of accounting improprieties at AIG involving a unit of Mr. Buffett’s company.

The company’s chief executive officer, Maurice “Hank” Greenberg, was forced out in mid-March as those charges mounted. Mr. Greenberg is scheduled to speak with regulators tomorrow.

“We believe [Mr. Buffet] can shed light on a series of transactions that … Hank Greenberg participated in,” Mr. Spitzer said in an interview with ABC’s “This Week” program.

Mr. Spitzer stressed that Mr. Buffet was “not a subject or a target of our investigation,” but said, “There are some ambiguities that will be hopefully addressed [today] in our discussion with Mr. Buffett.”

“He is a witness, in our view, and the focus of this investigation is AIG and the much broader reach of the offshore entities that AIG has created that we believe were, in many respects, fraudulent,” Mr. Spitzer said.

Mr. Buffett was subpoenaed in January and has said he would cooperate.

The New York Times reported Friday that documents from a 2000 reinsurance transaction at the center of the probes had been doctored several months after the deal was struck. The newspaper cited unnamed executives with direct knowledge of the transaction, who said the deal was “repapered” by midlevel employees of General Re Corp., a unit of Berkshire Hathaway of Omaha, Neb.

The Times said the modification was detected by lawyers Berkshire Hathaway hired to audit General Re in connection with an unrelated case.

In a recent television interview, Mr. Greenberg’s attorney, David Boies, said AIG’s accounting neither greatly influenced the market nor misled people.

“Well, obviously I disagree with that,” Mr. Spitzer said yesterday. “The evidence is overwhelming that these were transactions created for the purpose of deceiving the market. We call that fraud. It is deceptive. It is wrong. It is illegal.”

Still, Mr. Spitzer would not say an indictment was forthcoming.

“We have powerful evidence. We will proceed with it,” he said. “It could be civil. It could be criminal.”

Last month, AIG acknowledged that it had improperly recorded transactions with General Re that served to boost its reserves.

Reinsurance traditionally has been used to spread risk among insurers but, in some cases, it has been used for the questionable purpose of polishing a company’s financial statements. If there is no risk transfer, the deal shouldn’t be booked as insurance.

In the case under review, AIG purchased reinsurance from General Re in the fourth quarter of 2000 and first quarter of 2001. Investigators have said that AIG used the deals to pump up its reserves when markets were uneasy about the company’s outstanding liabilities.

When asked whether he thought Mr. Buffet’s impeccable reputation would remain intact, Mr. Spitzer replied, “I sure hope so. … Warren Buffett is an icon. He has succeeded the right way. He stands for smart, long-term investing, transparency, accountability - all those things we value and support.”

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