Berkshire's In for a Bruising

Buffett's only public comment on the AIG deal came on March 29, when Berkshire said that its CEO "was not briefed on how the transactions [between Gen Re and AIG] were to be structured or on any improper use or purposes of the transactions." Reportedly, Buffett stuck to this position when questioned Monday by officials from the SEC and Spitzer's office.

So, why not take Buffett's word for everything and go along with Sptizer's view that he should be viewed only as a witness?

First, Spitzer's motives may not align with good justice. Payback could be a partial motive: Berkshire's lawyers have provided regulators with much material that has helped them corner Greenberg and AIG. The same material could be used against Berkshire, of course, but the case against Berkshire might be slightly more sophisticated, given that the company appeared to be providing the questionable insurance and not using it to improperly enhance its own financial statements.

Moreover, Spitzer's tactic again and again has been to put recognizable figures in the spotlight and then leak like crazy to the media so as to try his targets in the court of public opinion and bully a settlement out of them. Buffett is way too popular with investors and "ordinary people" to make that approach easy; indeed, he may be one of the few sacred cows left in American capitalism.

For the Record

It's also important to recognize how far Spitzer has gone out on limb in classifying Buffett solely as a witness. A person familiar with the SEC's stance said that the agency was not approaching Buffett merely as a witness and hadn't ruled out the possibility of the executive being a potential target. It's not often that the SEC takes a markedly tougher stance than Spitzer.

Indeed, usually it's the other way around. For example, in late 2003, Spitzer said his office was going to continue its probe of mutual fund firm Putnam Investments, even though the SEC announced that it had reached a tentative settlement with the company. That was a very public maneuver that told the mutual fund industry that Spitzer thought the SEC was being too lenient. In a similar way, the SEC is signaling now that it's not ready to take a softer line toward Buffett.