December 5, 2007
The Oracle of Omaha On the Witness Stand
The prosecution of four former senior officers of General Reinsurance, including its former CEO, and a former officer from American International Group (AIG) is set to begin shortly in Connecticut. General Re is a subsidiary of Berkshire Hathaway, and the case involves a transaction between the company and AIG that the government alleges was designed to help AIG prop up its reported loss reserves, thus creating false financial statements because the transaction was not a bona fide reinsurance agreement. AIG subsequently restated its financials for the transaction, and the government claims that the General Re defendants knew that the contract was to help AIG falsify its records. Doesn't that sound like something to keep jurors on the edge of their seats? The superseding indictment (available below) has sixteen counts, charging conspiracy, securities fraud, false statements to the SEC, and mail fraud.
The government's list of possible witnesses (available below) includes the CEO of Berkshire Hathaway, famed investor Warren Buffett, nicknamed the "Oracle of Omaha" for his legendary ability to buy assets on the cheap. If there is any such thing as an investment rock star, the 77-year old Buffett certainly qualifies. Buffett was interviewed in the government's investigation, and media reports indicated that he asserted the General Re defendants, which include the company's former general counsel and CFO in addition to its CEO, did not tell him the real purpose of the AIG transaction. Buffett no doubt brings a little star power to a case that has all the potential to be a major snoozer given the complexity -- or perhaps impenetrability -- of reinsurance.
If Buffett testifies for the government, how will the defense lawyers handle someone referred to as an "oracle"? The defense counsel in the case come from some of the leading firms with well-known white collar defense groups -- Steptoe & Johnson (including Reid Weingarten, who defended Bernie Ebbers), Covington & Burling (including Alan Vinegrad, former U.S. Attorney in Brooklyn), Cadwalader & Wickersham (including Jim Robinson, former head of the Criminal Division at DOJ), Proskauer Rose, and litigation boutique Hafetz & Necheles. How these different lawyers handle Buffet will the interesting to watch, should he testify.
The government lists thirty witnesses it may call, not including possible rebuttal witnesses, while the defense has sixty-five potential witnesses. Those lists of witnesses are usually inflated so that neither side can be accused of calling a witness who the other side didn't know about. Even these inflated numbers indicate that the case is unlikely to be a quick one. (ph)
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