Regulators Question Buffett in AIG Probes
Billionaire investor Warren E. Buffett was questioned by regulators Monday in connection with federal and state probes into insurance titan American International Group Inc., saying afterward, “I told them everything I know.”
But the lawyer for Maurice “Hank” Greenberg, former chief executive of AIG, said his client would invoke his 5th Amendment privilege and decline to answer questions from the Securities and Exchange Commission and the New York attorney general’s office in an appearance slated for today.
Lawyer David Boies said the large number of transactions being examined and the fact that some occurred years ago “have precluded Mr. Greenberg from adequately preparing this testimony at this time.”
Among the transactions under investigation is one between AIG and General Re, a unit of Buffett’s holding company, Berkshire Hathaway Inc.
Buffett spoke briefly to reporters as he left the Woolworth Building in New York, where the SEC has an office. Asked whether General Re turned over documents in exchange for leniency, Buffett said, “No. We complied with the subpoena.”
A spokesman for the SEC had no comment on the possibility of Greenberg taking the Fifth.
“That’s his right,” said Marc Violette, a spokesman for New York Atty. Gen. Eliot Spitzer, whose office also is investigating AIG’s business practices and insurance transactions.
Greenberg was forced out in March as allegations of improprieties mounted. When asked by reporters about Greenberg, Buffett replied, “I don’t really know anything about that.”
In a statement Monday, Greenberg noted that AIG was involved in millions of transactions each year. He said it was unfair to demand his testimony unless investigators narrowed the scope of their questions.
“I am willing to accept responsibility and to account for the performance of my duties, but I believe that good order and fairness require that I have an adequate opportunity to be advised of the issues to be investigated and to my alleged involvement therein,” Greenberg said.
Investigators are looking into a number of reinsurance transactions, which involve insurance purchased by insurance companies such as AIG. Reinsurance traditionally has been used to spread out risk among insurers, but in some cases it has been used for the questionable purpose of polishing a company’s financial statements.
In the case under review, AIG purchased reinsurance from General Re in the fourth quarter of 2000 and the first quarter of 2001. Investigators have said AIG used the deals to pump up its reserves when markets were uneasy about the company’s outstanding liabilities.
After Greenberg quit, AIG said its accounting for the transactions with General Re “was improper and, in light of the lack of evidence of risk transfer, these transactions should not have been recorded as insurance.”
AIG shares rose 19 cents to $52.10 on the New York Stock Exchange on Monday but are down 21% year to date. Berkshire’s Class B shares rose $32.50 to $2,915, also on the NYSE. They are down 0.7% this year.
