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Will Warren Buffett Get Grilled in Hartford?  (I Have My Doubts)

Warren Buffett, right, chairman of Berkshire Hathawy Inc., speaks to the media while Ron Ferguson, chairman and chief executive officer of General Re, listens in New York on Friday, June 19, 1998. Berkshire Hathaway Inc. is buying General Re for $22 billion worth of stock, adding one of the world's leading insurers of insurance companies to its portfolio. Berkshire announced Friday after the stock market closed that it would let General Re operate independently of its other insurance operations,
Adam Nadel
Warren Buffett, right, chairman of Berkshire Hathawy Inc., speaks to the media while Ron Ferguson, chairman and chief executive officer of General Re, listens in New York on Friday, June 19, 1998. Berkshire Hathaway Inc. is buying General Re for $22 billion worth of stock, adding one of the world's leading insurers of insurance companies to its portfolio. Berkshire announced Friday after the stock market closed that it would let General Re operate independently of its other insurance operations,

A criminal corporate fraud trial that could bring Warren Buffett to the witness stand for some tough questioning is now underway in a federal courthouse in Hartford, Connecticut. Emphasis on could. Here's why:

Five insurance executives are on trial. Four of them used to work for Berkshire Hathaway subsidiary General Re. The fifth was employed by American International Group.

The government accuses them of orchestrating a reinsurance transaction that appeared to be proper but, as the result of a "secret, unwritten side deal" among the defendants and other co-conspirators, was really a sham.

Prosecutors say they will show that in a process kicked off by AIG's then-CEO Maurice Greenberg, the conspirators worked to artificially and illegally inflate AIG's loss reserves by half a billion dollars in the years 2000 and 2001, giving a boost to the company's flagging stock price by making it appear AIG could handle more claims than it really could. In exchange, the government claims, General Re got a few million dollars on the side and kept a big client happy.

(The Hartford Courant has one of the more detailed descriptions of the deal as outlined by prosecutors. Even the complexity of the transaction is at issue, with the government portraying it as a fairly straightforward "lie", while the defense sees "confusion, uncertainty, complexity and doubt.")

Warren Buffett is not accused by the government of doing anything wrong. While Berkshire acknowledges that Buffett knew generally about the deal, it says he wasn't aware of the specifics and didn't think that it might be illegitimate in any way. That's consistent with Buffett's portrayal of himself as an owner who doesn't get very involved at all with the specifics of how his companies are managed.

But lawyer Reid Weingarten, who is representing former General Re CFO Elizabeth Monrad, told the jury in his opening argument that Buffett "knew about the transaction. He was mightily interested in AIG... There is not a chance in this world that this transaction would have proceeded if Warren Buffett hadn't wanted it."

Weingarten is not arguing, at least explicitly, that Buffett was in on some kind of plot. He's saying that because Buffett, a man with a great reputation for integrity, knew about and approved the transaction, the defendants would have no reason to think they were doing anything wrong, and in fact, weren't doing anything wrong.

Weingarten has told CNBC's Charlie Gasparino he's thinking about calling Buffett to the stand. Prosecutors have put Buffett on their list of potential witnesses, but say they would only call on him to testify to refute any defense claim that he approved the deal in question armed with extensive knowledge about it.

The extent of Buffett's knowledge is very important. Even if Weingarten can show that Buffett was aware of the deal and approved it, or at least didn't try to stop it, the government will presumably argue that Buffett was another victim of the conspirators' efforts to conceal the true, illicit nature of the transaction.

It feels like an uphill battle for the defense, and I have my doubts about whether Weingarten will go ahead and actually call Buffett to the stand for a grilling about what he knew and when he knew it.

Depending on how heavily Weingarten plays the Buffett card without calling him to the stand, however, the government could go ahead and ask him to testify about how little he knew. Buffett has been cooperating with the government in its investigation.

As Yale's Jeffrey Sonnenfeld told the Courant, Buffett's "morals are beyond reproach" and it's totally unlike Buffett to be deeply involved in details "so far removed from the bigger-picture strategic issues that he focuses on."

For Sonnenfeld, it "smacks of an act of desperation to drag Buffett into it."

Questions? Comments? Email me at buffettwatch@cnbc.com