General Re, Faraday Execs Placed on Leave Over Reinsurance Probe
by Joe Ruff
The Insurance Journal
May 17, 2005
Two insurance employees will be placed on paid leave as federal officials conduct probes into insurance practices, billionaire investor Warren Buffett's Berkshire Hathaway Inc. said.
In a filing last Friday with the Securities and Exchange Commission, Berkshire officials said an employee of a subsidiary of General Re Corp., and the chief executive of London-based General Re subsidiary Faraday Group, Milan Vukelic, have been placed on paid leave effective this Monday, subject to their continued cooperation with investigators.
Vukelic once headed General Re's international finite insurance unit.
Omaha-based Berkshire, which owns a host of insurance and other companies, said five current or former insurance employees and executives face questions in government investigations.
Berkshire officials did answer the telephone at their offices Saturday night as The Associated Press sought further comment.
Wide-ranging probes into reinsurance are being conducted in the United States and overseas. Reinsurance is purchased by primary insurance companies to help spread policy risk. Federal investigators have said the product could be used improperly to help companies artificially bolster their financial statements.
Berkshire said the employee of a General Re subsidiary who will be on paid leave is a target of a U.S. Justice Department probe and an SEC investigation. Berkshire did not name the employee nor did it name the subsidiary.
In addition, the SEC is investigating an executive at General Re and a former officer of General Re, Berkshire said. Another former officer of General Re is a target of an investigation being conducted by the U.S. attorney for the Eastern District of Virginia, Berkshire said.
Berkshire did not name the executive and former officers.
General Re subsidiary Cologne Re is cooperating fully with a recent request from the German Federal Financial Supervisory Authority regarding some of Cologne Re's reinsurance products and transactions with New York-based American International Group, Berkshire said.
General Re has been under federal investigation over some of its reinsurance transactions with AIG and with Virginia-based Reciprocal of America, a former liability insurer of doctors, hospitals and lawyers. In one transaction, AIG has acknowledged that its accounting for a General Re deal was improper. Insurance investigations involving General Re also are being conducted in Ireland.
Buffett answered questions about the General Reinsurance-AIG probe in New York on April 11, but regulators have said Buffett is not a target of the investigation.