Billionaire investor Warren Buffett is cooperating with regulators investigating a controversial transaction undertaken by one of his main operating companies but was never briefed on the nature of the deal, his holding company Berkshire Hathaway Inc. said Tuesday.
Top executives of Berkshire Hathaway and its insurance unit, General Reinsurance, have "voluntarily given interviews" with investigating authorities,and Buffett himself will do so "shortly," the statement said.
But the company denied published reports that Buffett might have been closely involved in a 2000 deal that allegedly bolstered the balance sheet of embattled American International Group, which has jettisoned its longtime chairman and chief executive Maurice "Hank" Greenberg over the investigation.
"Mr. Buffett was not briefed on how the transactions were to be structured or on any improper use or purpose of the transactions," Berkshire said in the statement.
The company also denied a report in The Wall Street Journal that Buffett, 74, typically speaks each afternoon with the chiefs of Berkshire's operating companies.
With the exception of reinsurance executive Ajit Jain, "Mr. Buffett speaks infrequently with the Berkshire Hathaway business unit managers and leaves operating decisions for the business units to the individual managers, a policy publicly reported regularly since 1984," Berkshire Hathaway said.
The Journal reported Tuesday that Buffett, chairman and CEO of Berkshire Hathaway, has been called by regulators to answer questions next month. With a fortune estimated at $41 billion, Buffett is ranked as the nation's second-richest individual behind only his friend Bill Gates, chairman of Microsoft.
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Since Greenberg, 79, was ousted as chief executive March 14, federal investigators have issued subpoenas for a dozen AIG executives and have uncovered 10 financial transactions that warrant greater scrutiny, a source told The Associated Press Monday, confirming an earlier report in the Journal.
Greenberg, who also faces an April 12 meeting with investigators in response to a subpoena, will step down as chairman this week as the company face an expanding probe by the Securities and Exchange Commission and New York State Attorney General Eliot Spitzer.
Under investigation are a number of reinsurance transactions — insurance purchased by insurance companies — that regulators contend were designed to improve AIG’s financial statements without the transfer of risk. Risk transfer is necessary for a deal to be an insurance transaction and determines how it’s carried on a company’s books.
Greenberg joined the company in 1960, and took over as its head eight years later when founder C.V. Starr died. While Greenberg is considered a pioneer in the insurance world — shaping AIG from a small life insurance company to a global insurer with revenues approaching $100 billion — his presence at the company had become seen as an obstacle for AIG in settling the regulatory inquiries.
AIG said lead director Frank G. Zarb will assume the duties of chairman until a new one is selected. Greenberg’s departure is effective Wednesday or Thursday when he returns from an overseas business trip.
Regulators expect to interview Buffett on April 11 about documents and witnesses that they believe indicate he was involved early on in discussions about the transaction between General Re Corp., a unit of Berkshire Hathaway, and AIG, including its structure, the source told the Journal.
Investigators suspect that before General Re completed the transaction in 2000, the unit’s then-CEO, Ron Ferguson, briefed Buffett on the nature of the deal, the Journal said, citing its source.
Buffett declined through a spokeswoman to comment for the Journal story. Ferguson, reached by phone by the Journal, declined to comment.
AIG has fired three executives — including Chief Financial Officer Howard I. Smith — for not cooperating with investigators, and it remains unclear how much Greenberg will say as part of the probes.
On Sunday, the company forced out Michael Murphy, an executive who worked for American International Co., a Bermuda-based unit of AIG. AIG spokesman Chris Winans said Murphy was terminated “for failure to cooperate with investigators.” He declined further comment.
A number of other AIG executives have been dismissed, including four who entered guilty pleas in the probe launched by Spitzer into bid rigging and price fixing by New York-based broker Marsh & McLennan Companies Inc.
In a statement e-mailed to reporters late Monday, Spitzer praised AIG board’s for making “difficult decisions.”
“While there is a long way to go before this investigation is complete, the wise actions of the AIG board will help set this investigation on a path toward resolution,” Spitzer said. “I commend the AIG board for acting in a way that sets it apart from other boards that have faced similar problems in recent years.”
In a letter to independent directors late Monday, sent through his attorney, Greenberg offered to help recruit a new chairman.
“In order to lead meaningful changes in the industry and at AIG, the company and its officers and directors must resolve any outstanding questions or issues and move forward,” according to the letter from Greenberg’s attorney, David Boies, to Richard Beattie, who represents AIG’s independent directors. “To that end, Mr. Greenberg recognizes the need to promptly and cooperatively resolve all inquiries and investigations by regulators and other authorities.”