Berkshire Says SEC May Sue Former General Re Chief
October 8, 2005
Oct. 7 (Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc. said Ronald Ferguson, former chief executive officer of its General Re unit, has learned he may be sued by regulators probing improper reinsurance accounting.
The U.S. Securities and Exchange Commission informed Ferguson of the possible suit in a so-called Wells notice, Omaha, Nebraska-based Berkshire said in a statement today, citing information from his attorney. Ferguson, who stepped down as CEO in 2001, was fired as a General Re consultant in May after refusing to answer prosecutors' questions, Berkshire said.
Ferguson, 63, was one of several executives who knew in 2001 that American International Group Inc. intended to misuse a General Re contract to distort its finances, according to two former executives who pleaded guilty to federal charges of conspiring to violate securities laws in June. AIG, the world's largest insurer, restated $3.9 billion of earnings in May after inquiries into the contract led to a broad probe of its accounting.
"This is another significant step in the investigative process," said Jacob Frenkel, a former federal prosecutor who now practices law in Rockville, Maryland. "The SEC is non- discriminatory when it comes to suing CEOs."
Douglas Koff, Ferguson's attorney, didn't immediately return a phone call seeking comment. Berkshire Chief Financial Officer Marc Hamburg declined to comment beyond the statement.
The SEC last month sent a Wells notice to General Re's current CEO, Joseph Brandon, as part of the same investigation. Brandon reports directly to Buffett, who has accumulated dozens of companies as Berkshire's billionaire chairman and CEO.
Shares of Berkshire were unchanged at $83,100 at 10:42 a.m. in New York Stock Exchange composite trading. The stock has fallen 2.3 percent in the past year, compared with a 12 percent gain in the NYSE Composite Index.