The resignation of General Re's CEO, apparently in response to pressure from Federal prosecutors, is generating some heated debate on whether Washington should stay out of Warren Buffett's boardroom.
Berkshire Hathaway announced Monday that CEO Joseph Brandon, once seen as a possible Buffett successor, had resigned from his post at General Re, a Berkshire subsidiary.
The Wall Street Journal had reported a week before that prosecutors wanted Brandon out following the conviction of four other Gen Re executives in a scheme to artificially inflate AIG's earnings several years ago. Brandon was identified as an unindicted co-conspirator but had cooperated with the government's investigation, even though he didn't request immunity from prosecution.
In my WBW post on the WSJ report, I suggested the government should either bring charges against Brandon or back off. Allowing an informal accusation, backed by the threat of possible prosecution, to force anyone out of their job, strikes me as coming dangerously close to violating our nation's long-standing "innocent until proven guilty" tradition.
The New York Times recently detailed how the Justice Department is increasingly turning to "deferred prosecution agreements" instead of prosecutions. Plea bargains, which are reportedly responsible for 95 percent of all felony convictions, aren't just for individual criminals anymore!
CNBC's Closing Bell has staged its own on-air debate on the issue. Here's the video clip. Former prosecutor Jacob Zamansky sees "an appropriate use of Federal muscle," arguing that Brandon is "getting off easy" by only losing his job. He points out that the Feds could have gone after General Re as a corporate entity, which might have destroyed the company, just like Arthur Andersen.
Trial attorney Joel Androphy argues the government should stay out of "corporate business" because it can't do a better job than even the Gen Re executives who were convicted. He thinks Brandon fell victim to the "court of government opinion."
The discussion got especially heated when our own Dennis Kneale suggested Buffett had surrendered to an "Eliot Spitzer-like" manuever and rhetorically asked why the government didn't go after Buffett himself.
Current Berkshire price:
See Warren Buffett Watch on CNBC's The Call, most weekday mornings at 11:50a ET
Questions? Comments? Email me at firstname.lastname@example.org