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A Rare Moment of Bad Press for Buffett

Warren Buffett's Berkshire Hathaway is being accused of some very bad behavior in a law suit filed this week by a former manager.

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Berkshire Hathaway

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shares have slipped approximately $2.50 this week through Thursday, closing below $80 on Wednesday and Thursday -- the first time shares of

Warren Buffett's

investment company have closed below the $80 mark since the last week of February.

Still, that wasn't the bad news for Berkshire Hathaway this week.

In fact, a lawsuit that was filed in U.S. District Court in South Bend, Indiana earlier this week alleges Berkshire Hathaway ethical violations that are in stark contrast to

Berkshire Hathaway's recent dubbing as the business with the best reputation in the U.S.

The law suit was filed by an ex-Berkshire Hathaway employee, Brad Mart, saying that Berkshire Hathaway executives fired him for whistle-blowing on fraud at Berkshire's RV subsidiary,

Forest River


In a complaint filed with the U.S. District Court for Northern Indiana, Mart alleges that after bringing to the attention of Berkshire Hathaway executives millions of dollars in fraud, Buffett and Berkshire Hathaway senior staff made no effort to address the situation.

Mart alleges that after being promised the post of CEO at Forest River, he was fired for his whistle blowing activity.

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The alleged fraud that Mart specifies in the court complaint includes the removal of cash from Forest River factory vending machines for deposits made to the personal account of Forest River CEO Peter Liegl.

Mart has asked the U.S. District Court for the CEO post he says he was promised, and damages including money he lost when he purchased a new home on the expectation of receiving the CEO post at Forest River.

Still, for squeaky clean Warren Buffett, the court complain gets much uglier than the monetary damages. Mart claims that Forest River CEO Liegl threatened his life. Mart is also suing Forest River for breach of contract.

Mart also contends in the complaint that Berkshire Hathaway shareholders were defrauded when Forest River used smoke and mirrors accounting tricks to allow CEO Liegl to pay former employees salary or benefits.

The former Berkshire Hathaway manager's complaint also alleges that Forest River CEO Liegl required the company - which makes RVs, restroom trailers and pontoon boats - to buy parts at inflated prices from another company which he owned.

Berkshire Hathaway denied the allegations in an interview with


. Berkshire Hathaway secretary Forrest Krutter told Bloomberg that "Mr. Mart did not alert Mr. Buffett to any unethical, fraudulent or illegal activities... My investigation did not identify any fraudulent, unethical or illegal activities." What's more, Krutter told Bloomberg there was "no evidence or indication" that any death threats were made. The Berkshire Hathaway executive said Mart was fired for reasons unrelated to his allegations of financial misdeeds by Liegl and Forest River.

Mart claims he told Buffett directly about the Forest River financial shenanigans in six separate phone conversations. The Berkshire Hathaway executive refuted that claim as well, telling Bloomberg that Mart spoke to Buffett three times and never told Buffett about the unethical behavior.

Mart was fired early last year after helping to arrange Berkshire's 2005 deal to buy Forest River for about $800 million according to the complaint. Mart said that he was named general manager of the company's financing business after it was bought by Berkshire and then told in 2007 he would succeed Liegl as CEO. Mart said he reported violations to Buffett in six separate phone conversations.

If Berkshire's refutations are accurate, the complaint could amount to no more than the case of a disgruntled executive who worked hard, in his own opinion, to bring Buffett a good investment, and in the end, felt snubbed by Berkshire Hathaway and Buffett.

Mart's complaint says that he helped to arrange Berkshire's 2005 deal to buy Forest River for about $800 million. The court filing states that Mart was named general manager of the Forest River's financing business after the Berkshire acquisition, and that in 2007 he was informed by Berkshire Hathaway that he was in line to succeed Liegl as CEO.

-Reported by Eric Rosenbaum in New York.


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