Berkshire's In for a Bruising

To be sure, if Buffett does become a target, it won't matter much that -- unlike Greenberg -- he didn't speak under oath. His responses in the Monday interview could in theory be used against him if they are found to contradict other evidence. True, he couldn't be charged with perjury. But the government could still prosecute him if it found he made false statements -- the very charge that landed Martha Stewart in jail. And if Buffett does become a government witness in any trial proceedings, there is actually a slight advantage to have him avoid sworn testimony at this early stage. That's because lawyers for the opposing side can look for small discrepancies in testimony given under oath and use them to discredit the witness.

Other developments show that Buffett is not in the clear.

The AIG-General Re deal is clearly shaping up as Buffett's word against that of Ronald Ferguson, the Gen Re exec who worked with AIG to put the deal together. Buffett says that he didn't know the details of the deal, but the Washington Post, citing an unnamed regulatory source, says that Ferguson has testified that he gave Buffett details of the deal. No outsider to the deal or the investigative process can know who's right.

But it is noteworthy that Buffett reportedly did tell regulators Monday that, in connection with the AIG deal, he and Ferguson did discuss Greenberg's alleged desire to boost reserves. That's important because surely Buffett knows that if an insurance company wants to boost its reserves, it just goes ahead and boosts them. Of course, that usually means a hit to earnings and capital. So eyebrows should be raised as soon as any insurer expresses the desire to boost reserves without taking any real dent in its income statement or balance sheet. Seeing as Buffett knows that, it would seem logical that he then inquired why AIG needed a product that might allow it to avoid the income statement pain that should come with reserve strengthening.