Probes into Berkshire's Gen Re widen

By Jonathan Stempel
Reuters
May 10, 2005

NEW YORK (Reuters) - An executive at TIAA-CREF, one of the largest U.S. pension funds, may be sued by securities regulators in connection with her former job at General Re Corp., the reinsurance unit of Warren Buffett's Berkshire Hathaway Inc.) .

TIAA-CREF granted Chief Financial Officer Elizabeth Monrad, who once held the same position at General Re, an unpaid leave of absence after learning she may face a U.S. Securities and Exchange Commission lawsuit, the fund said on Tuesday.

Monrad is at least the second top General Re executive to get a "Wells notice" from the SEC. Berkshire on May 6 said a current General Re senior vice president also received one. Published reports have identified him as Richard Napier.

The SEC is probing accounting problems at insurer American International Group Inc.  The New York Times, citing an unnamed source, said the SEC notice to Monrad concerns her role in altering paperwork for that transaction.

"It appears to show the Commission's sensitivity to the high-profile nature of the investigation," said Jacob Frenkel, a former SEC enforcement lawyer and partner at Shulman, Rogers, Gandal, Pordy & Ecker PA in Rockville, Maryland. "If the SEC actually sues these individuals, there is a strong possibility it will charge the company for its conduct."

A Wells notice indicates that SEC staff has found possible infractions, and gives the recipient a chance to respond.

Investigators are examining a 2000 reinsurance contract involving Stamford, Connecticut-based General Re that helped AIG improperly increase its reserves by $500 million.

Monrad requested the leave, which was made final on Tuesday, TIAA-CREF spokeswoman Stephanie Cohen Glass said.

General Re did not immediately return calls seeking comment. SEC spokesman John Nester declined to comment. Monrad could not immediately be reached.

Regulators have in recent months sought information from many insurers and reinsurers over the possible improper use of non-traditional reinsurance products. They want to know if the products really function as loans to smooth earnings, and don't transfer sufficient risk associated with insurance.

General Re did not immediately return calls seeking comment. SEC spokesman John Nester declined to comment. Monrad and Houldsworth could not immediately be reached.

Regulators have in recent months sought information from many insurers and reinsurers over the possible improper use of non-traditional reinsurance products. They want to know whether the products function as loans to smooth earnings and don't transfer sufficient risk associated with insurance.

BUFFETT QUESTIONED

Omaha, Nebraska-based Berkshire has said Buffett didn't know AIG might use the General Re transaction improperly.

Regulators interviewed Buffett about the transaction on April 11. Nineteen days later, at Berkshire's annual meeting, Buffett said, "it really gets down to whether there is knowing participation" before a reinsurer might be responsible for its client's wrongdoing.

Frenkel stressed that "there is no connection between a Wells notice and what, if anything, may happen in the criminal investigative process."

Australian, British and Irish regulators are also examining various General Re activities, Berkshire has said.

Monrad joined TIAA-CREF in July 2003 from General Re, where she was a member of its executive committee and board of directors. In 1999, the Association of Professional Insurance Women named her Insurance Woman of the Year.

Russell Noles, a TIAA-CREF vice president of internal audit, will serve as the pension fund's acting CFO. Arlen Copenhaver, an associate auditor, will take over Noles' audit job on an acting basis. TIAA-CREF oversees more than $340 billion in assets.

In Tuesday trading on the New York Stock Exchange, Berkshire Class A shares fell $150 to $83,100, Berkshire Class B shares fell $15 to $2,761, and AIG shares fell $1.31 to $53.27.

(Additional reporting by John Poirier, Chris Sanders and Bill Berkrot)


Copyright 2005 Reuters



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