Berkshire Survives Spitzer

Warren Buffett’s Berkshire Hathaway, whose General Re Corp unit has been investigated over its role in helping insurer American International Group misstate results, said governmental authorities were inquiring about some of its own accounting.

In its quarterly report filed on Friday with the US Securities and Exchange Commission, Berkshire said the authorities were looking into the accounting by some of its insurance subsidiaries for finite reinsurance. Investigators have for several months in an industrywide prove been questioning whether such nontraditional reinsurance products can be used o mask losses or smooth earnings.
Berkshire, based in Omaha, Nebraska, also said the governmental authorities are questioning whether General Re or its subsidiaries “conspired with others” to misstate financial statements. The disclosures suggest that investigators may be widening their probe beyond General Re’s role in a 2000 reinsurance contract that help AIG improperly increase reserves by $500 million. Two former General Re executives in June pleaded guilty to conspiracy charges in the matter.
I suppose regulators are simple being thorough, and seeing if Berkshire accounted for something different from how its counterparties did,” said Steven Check, who overseas $470 million at Check Capital Management Inc in Costa Mesa, California, including $45 million in Berkshire shares. Warren Buffett has done things right for decades, so for me the benefit of the doubt should go to him.
The company also disclosed that Milan Vukelic, the chief executive of Faraday Group, a British unit of General Re, was fired in July, two months after begated Vukelic over transactions in 1998 between General Reinsurance Australia Ltd and Affiliates of FAI Insurance Australia Ltd. FAI was acquired the following year by HIH Insurance Ltd, Australia’s No2 general insurer, which became insolvent in 2001. Vukelic once ran General Re’s international finite reinsurance business unit. Among other regulators examining activities involving Berkshire units are federal Eliot Spitzer, and regulators in Australia, Canada, Germany and Ireland.
Berkshire also said that second Quarter profit rose 13% to $1.45 billion, or $941 per class A share, as higher investment income and fewer losses from insurance units helped offset a $619 million pretax losses from betting the US Dollar would fall. Buffett has wagered against the US dollar since 2002 amid concern about high US trade and budget deficits.