Berkshire's In for a Bruising
It's also a mistake to get too wrapped up in this one AIG deal. There are other Gen Re transactions that will be looked at in due course. There is no indication yet of Buffett's involvement in these, but regulators haven't really delved deeply into these.
Down Under
However, there is a wealth of detail available on a 1998 deal that National Indemnity, another Berkshire subsidiary, did with a shaky Australian financial company called FAI. The transaction made FAI look far healthier than it was. FAI was then bought a few months after the National Indemnity deal by another Australian insurer, HIH, which later crashed, in part due to the hidden weaknesses at FAI. An Australian government report shows in meticulous detail the role National Indemnity played in the FAI deal. (Detox first looked at it in 2003.) And this deal could come under the SEC's scrutiny, even though it was done with a foreign company. Berkshire's publicly traded status in the U.S. means anything it does falls under the jurisdiction of the SEC. While it is still debatable whether Buffett himself will end up in real trouble, it is hard to argue that Berkshire won't get penalized in some way. Its role in helping AIG carry out an apparently improper deal is really no different from the roles that J.P. Morgan (JPM Quote), Citigroup (C Quote) and Merrill Lynch (MER Quote) played in allegedly providing Enron with products that allowed the failed energy giant to make its financial statements look stronger than they were. The SEC obtained highly embarrassing settlements from each financial institution in connection with the products they provided to Enron.- Loading Comments...
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