Buffett Watch

Government Tells Warren Buffett to Fire Gen Re's CEO - WSJ

The Federal government is trying to get Warren Buffett to fire one of his top executives over a question of integrity, according to The Wall Street Journal.

Citing "people familiar with the situation," today's Journal says, "Federal prosecutors are pressuring Berkshire Hathaway to replace the chief executive of its reinsurance subsidiary, General Re." 

General Re CEO Joseph Brandon has not been formally charged with any crime, but the Journal says, "Prosecutors identified Mr. Brandon as an unindicted alleged co-conspirator" in a series of bogus deals designed to artificially inflate AIG's earnings and its stock price.  AIG was a big General Re client.

Four former General Re executives were convicted in the case in late February, including ex-CEO Ronald Ferguson.  Brandon "worked directly" for Ferguson, says the Journal. 

Buffett was not charged and did not testify at the trial.

The Journal says Brandon has cooperated with the government, without asking for immunity.  And the paper reports, "According to a person close to the matter, the company has said that by turning over tapes of recorded conversations of the defendants that were used during the trial, it has displayed a high level of cooperation" and thus shouldn't be charged.

The Journal quotes defense lawyers as saying it "isn't unheard of for prosecutors to suggest personnel changes as part of a settlement of a government investigation" and that "the practice has increased" as companies make what are, in effect, plea bargains, to avoid the time, expense and uncertainties of going to court.

It's controversial for the government to reach into the C-Suite and dictate who does, and doesn't, run a company, without making any formal accusations, much less proving them.

My opinion: the government has no business using the threat of legal action to tell Warren Buffett, of all people, that one of his top executives doesn't have enough integrity for the job and should be fired.

Prove it!  See you in court!

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