General Re’s CEO resigns
Warren E. Buffett’s Berkshire Hathaway Inc. said Joseph Brandon resigned Monday as chairman and chief executive of its General Re Corp. unit, less than two months after a jury convicted four former executives of the reinsurer of fraud.
Brandon was once considered a leading candidate to replace the 77-year-old Buffett at Berkshire’s helm. Franklin “Tad” Montross, president of Stamford, Conn.-based General Re, will replace Brandon as the unit’s chairman and CEO.
A federal jury in Hartford, Conn., on Feb. 25 convicted the former General Re executives and a former American International Group Inc. executive for their role in a reinsurance transaction that prosecutors said bolstered AIG’s loss reserves by $500 million, making its results look better.
Brandon has not been charged but his status grew less certain after the Securities and Exchange Commission told him in 2005 that he could face charges that he violated U.S. securities laws.
“You have to go back to Warren Buffett’s credo that management integrity is paramount,” said Chuck Hamilton, an analyst at FTN Midwest Securities Corp in Nashville. “The SEC and federal prosecutors often have quite a bit of weight in who sits in the top chairs, and can sway management into making changes. I suspect Buffett had no choice.”
Berkshire did not give a reason for Brandon’s departure. Brandon and Berkshire did not immediately return requests for comment. Spokesmen for the SEC and the U.S. attorney in Connecticut declined to comment.
Before becoming General Re’s CEO in 2001, Brandon was chief financial officer. He was a top executive at the time of the AIG transaction.
In his annual letter to Berkshire shareholders in February, Buffett praised Brandon and Montross for “doing first-class business in a first-class way” at General Re, adding that “the luster of the company has been restored.”
Ronald Ferguson, whom Brandon replaced as CEO, was among the convicted executives. Prosecutors called Brandon an unindicted co-conspirator, published reports show. Buffett has denied wrongdoing and was not called to testify at trial.
General Re’s 2007 revenue was more than $6 billion, about 5% of Berkshire’s total.
Buffett has said that he has three internal candidates to replace himself as CEO of Omaha-based Berkshire, his $199-billion insurance and investment company.
Many investors have said possible successors include David Sokol, the CEO of MidAmerican Energy Holdings Co., and Ajit Jain, who is spearheading Berkshire’s push into bond insurance.
