Buffett Parries Questions on AIG

By Jonathan Stempel
April 30, 2005

OMAHA, Neb. (Reuters) - Warren Buffett on Saturday again went on the defensive, resisting attempts by shareholders of his Berkshire Hathaway Inc. (BRK) to learn more about regulatory probes involving Berkshire units.

Buffett has in recent months suffered unwanted publicity as U.S. and Australian regulators examine transactions involving Berkshire's General Re Corp. reinsurance unit.

"To protect the integrity of any investigation like this, investigators do not want one witness talking with other witnesses, because people can tailor their stories," Buffett said in his opening remarks at Berkshire's annual meeting. "To talk in a public forum is a way of signaling people what you said."

In one such probe, U.S. regulators are examining a contract that helped giant insurer American International Group Inc. make its results look better. Berkshire has said Buffett was not briefed on the transaction's structure or any improper purpose.

Asked at what point a reinsurer might bear responsibility for another company's improper activity, Buffett said, "It really gets down to whether there is knowing participation."

That transaction led to the March departure of longtime AIG chairman Maurice "Hank" Greenberg, once considered the most powerful U.S. insurance executive. AIG has delayed filing its annual report, or 10-K, and said accounting problems dating back 14 years may force it to write down some $1.77 billion of shareholder equity.

Buffett was interviewed on April 12 by regulators inquiring into AIG's activities. Regulators subpoenaed several companies, including General Re, on whether "non-traditional" or "loss mitigation" products might function as loans to help companies smooth earnings, or camouflage earnings weakness or losses.

Despite his admonition, Buffett fielded a handful of shareholder questions on reinsurance, and at times appeared to sputter as he responded.

"I don't really think I should comment on AIG," he said in response to one question. "There will be more disclosure on the situation at AIG, and I really don't know about anything that will be in that statement (annual report). I will read that statement, and I will read it with interest."

Later, asked about Greenberg, Buffett said: "Hank Greenberg was the number one man in insurance. He developed an extraordinary company in his lifetime. ... But in terms of evaluating where it stands now, what will be revealed in the 10-K when it comes out, I just have no idea."

Copyright © 2005 Reuters

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