Possible accounting irregularities draw long look from regulators

0 Comments | Deseret News (Salt Lake City), Aug 8, 2005 | by Riva D. Atlas New York Times News Service

Regulators are looking into the accounting of some Berkshire Hathaway insurance subsidiaries, the company has reported in a regulatory filing, an indication that an investigation into insurance abuses centering on the American International Group may be widening.

Berkshire, a holding company controlled by the investor Warren E. Buffett, said in its quarterly filing late Friday that the government was looking at the accounting by some units for finite insurance contracts.

The company also said that Milan Vukelic, chief executive of a British affiliate of Berkshire's General Re subsidiary, had been fired.

Regulators, including the Securities and Exchange Commission, are interested in finite insurance because some companies may have used the deals to burnish their financial results or produce income that can be used to bolster earnings during tough times.

A deal reached between General Re and AIG in late 2000 has been the focus of regulatory scrutiny and led to the ouster in March of the chief executive of AIG, Maurice R. Greenberg. The $500 million transaction artificially bolstered AIG's reserves by $500 million in 2000 and 2001.

Greenberg has denied any wrongdoing. But two former General Re executives -- Richard Napier, 53, a senior vice president, and John Houldsworth, a chief executive at an Irish subsidiary -- pleaded guilty in June to conspiring to file false financial reports intended to enhance financial results of AIG.

Berkshire said regulators continued to review General Re's role in the AIG transaction. "Governmental authorities are also inquiring about the accounting by certain of Berkshire's insurance subsidiaries" for insurance dealings, the filing said. The company did not identify the divisions being examined.

Representatives of Berkshire were not immediately available Sunday. The company's Class A shares closed on Friday at $83,500, down $495. The shares have dropped 5 percent this year.

Vukelic, who had been chief executive of the Faraday Group, was previously put on administrative leave. Britain's Financial Service Authority advised Faraday it was investigating Vukelic, who previously served as head of General Re's international finite insurance unit, Berkshire said.