Berkshire Hathaway ( BRKA) said the former chief of its big reinsurance unit could soon face a Securities and Exchange Commission suit.

The Omaha, Neb., investment company said General Re's ex-CEO, Ronald E. Ferguson, received a Wells Notice from the SEC staff in connection with an ongoing probe of nontraditional insurance products. A Wells Notice indicates the agency's staff is considering recommending a civil suit against the recipient.

The SEC move comes as the authorities probe the relationship between General Re and AIG ( AIG). Investigators believe AIG propped up its stock price by massaging earnings and reserve levels through sham reinsurance transactions that involved no transfer of risk.

One deal, with General Re, had the effect of adding $500 million in so-called phony loss reserves to AIG's balance sheet, enabling the company to quiet Wall Street criticism, regulators have said. AIG, in an undisclosed side agreement, paid Gen Re a $5.2 million fee for putting the deal together. Authorities contend the Gen Re transaction began with a phone call from former AIG chief Maurice Greenberg to Ferguson, who was then Gen Re's president.

The Gen Re transaction is one of several irregular transactions that led AIG to restate its financial results for the four years going back to 2001. Ferguson stepped down as General Re's chief in Octber 2001 and was dropped by the company as a consultant this past May, as news of the probes emerged.

In June, Richard Napier, a former Gen Re senior vice president, pleaded guilty to a charge of conspiracy to falsify SEC filings as part of a scheme to enable AIG to artificially boost its insurance reserves. That plea came a day after John Houldsworth, a former top Gen Re executive in Ireland, pleaded guilty to a similar charge.

Warren Buffett, the Berkshire chief, hasn't been charged with any wrongdoing in the probe.

On Friday, Berkshire was flat at $83,100.

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