Warren E. Buffett, chief executive of Berkshire Hathaway, is scheduled to testify in the fraud case of four former General Reinsurance executives and a former executive from American International Group.
Berkshire Hathaway is the parent of Gen Re. Mr. Buffett is on a list of 30 witnesses federal prosecutors filed today with the U.S. District Court, in New Haven, Conn.
The five defendants, Ronald E. Ferguson, Christopher P. Garand, Robert D. Graham, all formerly with Gen Re, and Christian M. Milton, formerly with AIG, are accused in a 13 count indictment of conspiracy, securities fraud, false statements to the Securities & Exchange Commission, wire fraud and mail fraud.
Also on the list were several financial analysts including Jay Cohen of Merrill Lynch; Michael Lewis of UBS Warburg; Michael Smith with Bear Stearns & Co.; and Alice D. Schroeder at one time with Morgan Stanley.
The allegations against the executives revolve around accusations that they engaged in a scheme involving bogus finite reinsurance arrangements designed to improve AIG's financial picture to impress securities analysts and sustain its stock performance.
The deals allegedly began in 2000 after AIG's stock price dropped and the company encountered negative analyst reports.
The alleged scheme involved Gen Re lending AIG up to $500 million through a loss-portfolio transfer without transferring any risk of loss.
Recently, U.S. District Court Judge Christopher Droney allowed some tapes to be entered into evidence that allegedly would show how far AIG would go to present a phony financial picture.
The tapes recorded the executives discussing the financial transaction. The recordings were made by Gen Re on a system that automatically recorded calls for use in the event that an insurance derivative trade was disputed. (See NU Online, Nov. 5).
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