| HARTFORD, Conn.
HARTFORD, Conn. A transaction at a reinsurance
unit of Berkshire Hathaway Inc that federal prosecutors say
defrauded American International Group Inc (AIG.N) investors
was endorsed by Warren Buffett, a lawyer for one of five
defendants on trial for fraud said on Monday.
Executives at Berkshire's (BRKa.N)(BRKb.N) General Re Corp
unit and AIG did not conspire to hide the 2000 transaction,
which prosecutors say improperly bolstered AIG's loss reserves,
defense lawyer Reid Weingarten told a jury in opening
arguments. He said the executives had no reason to suspect the
transaction was improper because Buffett approved of it.
"He knew about the transaction, he was mightily interested
in AIG," said Weingarten, who represents the defendant and
former General Re Chief Financial Officer Elizabeth Monrad.
"There is not a chance in this world that this transaction
would have proceeded if Warren Buffett hadn't wanted it."
Prosecutors, in contrast, argued the defendants knew the
transaction was illegal and conspired to hide it.
"The deal appeared to be legitimate, but evidence in
reality showed the deal was nothing but a sham transaction to
deceive analysts and shareholders -- and these five defendants
knew it," Assistant U.S. Attorney Raymond Patricco told jurors
in his opening statement at their criminal trial.
Buffett, the chairman of Omaha, Nebraska-based Berkshire,
could be called to testify in the trial of the defendants, four
of whom worked at General Re and the other at AIG.
Berkshire has said Buffett was not briefed on the structure
of the AIG transaction and was unaware it might have had any
improper purpose. A spokeswoman for Buffett was not immediately
available on Monday to comment on Weingarten's statement.
The defendants, including former Gen Re Chief Executive
Ronald Ferguson, are on trial at the U.S. District Court in
They are charged with conspiracy, fraud and making false
statements in connection with the reinsurance transaction,
which prosecutors say allowed AIG to improperly boost reserves
by $500 million in 2000 and 2001. Prosecutors say this misled
investors about the amount of losses the insurer could
withstand and artificially inflated AIG stock.
AIG has acknowledged accounting improprieties and in May
2005 restated $3.9 billion in earnings from 2000 through 2004.
It agreed in 2006 to a related $1.64 billion regulatory
The restatement came two months after the ouster of AIG's
long-time chief, Maurice "Hank" Greenberg, who is an
unindicted, alleged co-conspirator in the government's case.
Greenberg has denied wrongdoing.
Prosecutor Patricco said the defendants crafted the deal
after Greenberg called Ferguson, who was then running Stamford,
Connecticut-based Gen Re, and said he needed help bolstering
AIG's loss reserves by $500 million.
"When Greenberg came calling, Ferguson had a clear choice:
Take $500 million, no strings attached, or disappoint Gen Re's
biggest client," he said.
In a statement, a Greenberg spokesman said that "there is
no evidence that Mr. Greenberg initiated, participated in, or
knew of a conspiracy or fraudulent scheme."
Others on trial include former Gen Re Senior Vice President
Christopher Garand, former Gen Re Assistant General Counsel
Robert Graham, and former AIG head of reinsurance Christian
A lawyer for Ferguson, Michael Horowitz, told jurors there
was no motive for his client to participate in any fraud. "Ron
is not guilty of the charges in this case," he said. "The
government can't prove guilt beyond reasonable doubt."
The first day of trial ended with the first government
witness, Charlene Hamrah of AIG investor relations, on the
If convicted, Ferguson, Monrad, Milton and Graham could
each face more than 200 years in prison and a $46 million fine,
prosecutors have said. Garand could up to 150 years in prison
and a $29.5 million fine, prosecutors have said.
(Writing by Martha Graybow and Jonathan Stempel, editing by
Gary Hill/Andre Grenon)