Berkshire Hathaway's involvement with an agency that gave a top rating last week to Berkshire's new municipal bond operation is under scrutiny by Connecticut authorities.

The State Attorney General Richard Blumenthal's office said he is investigating what he believes was a conflict of interest when Moody's Investor Service, partially-owned by Berkshire, rated Berkshire Hathaway Assurance Corp. "triple-A."

Mr. Blumenthal's probe is being undertaken independent of any of the other states.

BHAC was created last year after the major municipal bond insurers, hard hit by their involvement in the collapsing subprime mortgage market, saw their top ratings threatened, which could jeopardize their ability to underwrite municipal issues.

The firm came into being after New York Insurance Superintendent contacted Berkshire's billionaire chairman Warren Buffet and promised speedy licensing if the firm would create an entity to provide municipal bond insurance capacity.

Asked whether he had concerns yesterday, Mr. Dinallo e-mailed, "We invited Berkshire Hathaway to start a bond insurance company precisely because we were confident the company would receive the top 'triple-A' rating necessary to enter that business. Our concern was and continues to be that municipal bond issuers have access to bond insurance should they need it. We have no comment on the Connecticut investigation."

BHAC has also secured a top rating from Standard & Poor's.

Calls for comment to Berkshire Hathaway, which owns about 20 percent of BHAC, and Moody's were not immediately returned.

Mr. Blumenthal previously said he was conducting an antitrust investigation of the three major rating companies and the examination of the Berkshire-Moody's connection is part of that.

At issue is whether the rating firms demand payment after producing financial strength ratings against debt issuers' wishes.

Also being examined is whether rating firms threaten downgrades of debt ratings if they are not given all of a firm's rating business.

Special Reports /

Berkshire Moody's Link Probed By Conn. AG

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