Buffett Could Testify Against Former Underlings at Finite Re Trial

HARTFORD, Conn., Dec 03, 2007 (A. M. Best via COMTEX) -- BRK/A | charts | news | PowerRating -- Berkshire Hathaway Chairman Warren Buffett will likely testify in a federal trial against five former insurance executives accused of devising a fraudulent finite reinsurance transaction between American International Group Inc. and General Reinsurance Corp.

The billionaire investor, the third-richest man in the world, is on the government's newly disclosed witness list, along with former AIG Chairman Frank Zarb and equity analyst Jay Cohen of Merrill Lynch. Other current and former AIG and Gen Re executives also are on the list.

Ever since investigators began combing through financial records of Gen Re and AIG for clues into a $500 million finite re transaction that purportedly carried no real risk, Buffett has been cooperating with the government. On April 11, 2005, he met privately with investigators from the U.S. Securities and Exchange Commission, the U.S. attorney for the Eastern District of Virginia, and the New York Attorney General?s Office to be questioned about the transaction.

The government has indicated Buffett was not aware of the true nature of the transaction because Ronald Ferguson, a former Gen Re chief executive, allegedly made false representations about the arrangement.

Ferguson, Christian Milton, who previously ran AIG?s reinsurance unit, and former Gen Re executives Elizabeth A. Monrad, Robert Graham, and Christopher Garand all are charged with securities fraud, mail fraud, and offering false statements to the SEC. Jury selection in the case began Dec. 3 in Hartford, Conn. The trial is set to commence Jan. 7.

Other key government witnesses include Richard Napier, a former Gen Re senior vice president, and John Houldsworth, who was chief executive officer of Cologne Re Dublin, a Gen Re subsidiary. The two pleaded guilty to participating in the alleged sham transaction and have helped the government build its case (BestWire, Nov. 16. 2007).

The defendants have indicated they might call current Gen Re CEO Joseph Brandon as a witness.

In addition to the witness list, the defendants also received a mix of good and bad news from Judge Christopher F. Droney, who rejected the government's request to introduce evidence that Milton transferred ownership of two real estate properties to his wife, after AIG restated its earnings and he allegedly realized a criminal probe "was bearing down on him."

Prosecutors had claimed the property transfer shows consciousness of guilt (BestWire, Oct. 19, 2007). Droney said use of the evidence would create a trial within a trial situation, and waste the jury?s time.

Gen Re declined to comment on the case.

(By David Dankwa, senior associate editor, BestWeek: David.Dankwa@ambest.com)

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