Friday, September 9, 2005
Joseph Brandon, the current CEO of General Re, has received a Wells Notice from the SEC that the Enforcement Division staff intends to recommend a civil action against him for violations of the securities laws in connection with the AIG-General Re "finite insurance" transaction that has been the subject of an ongoing investigation. Two former General Re executives (John Houldsworth and Richard Napier) have already entered guilty pleas related to their roles in the transaction, and former General Re CFO Elizabeth Monrad (who is on unpaid leave from TIAA-CREF, where she was the CFO) and CEO Ronald Ferguson have already been notified by the Commission that they may be named in a securities fraud complaint. (See earlier post here). Ferguson's consulting contract with the company was terminated when he refused to cooperate in the SEC investigation by asserting his Fifth Amendment privilege. Brandon replaced Ferguson as CEO of General Re in 2001, and other executives who received Wells Notices ultimately have been relieved of their duties, and it will be interesting to see if Brandon receives the same treatment. A story on Bloomberg.Com discusses the SEC notice (here).
General Re is a wholly-owned subsidiary of Berkshire Hathaway, whose CEO Warren Buffett has already voluntarily appeared and given a statement to the SEC and U.S. Attorney's Office. The SEC's case has reached as high as it can within General Re, and the interesting question is whether Buffett will receive a Wells Notice. I think it's unlikely, given Buffett's usual hands-off approach to the operations of subsidiaries, but it is certainly not impossible if he played a role in the accounting decisions related to the transaction. (ph)
UPDATE: Add two more General Re executives (one recently retired) to the list of those who received Wells Notices from the SEC related to their roles in the AIG finite insurance transaction. Berkshire Hathaway issued a press release (here) disclosing that Christopher Garand, a former Senior V-P who retired on Aug. 31, and Robert Graham, a Senior V-P and Assistant General Counsel at the comapny, both received their Wells Notices on Sept. 8. As with General Re CEO Joseph Brandon, the question regarding Graham is whether he will be allowed to continue in his job. (ph)