Buffett's role disputed as former executives head to trial

NEW HAVEN, Conn. — Billionaire investor Warren Buffett has long been revered in the business world, but his importance at a trial involving the world's largest insurer is hotly contested.

The trial starts today in federal court in Hartford for four former executives of Berkshire Hathaway's General Re Corp. and a former executive of American International Group Inc. who are charged with participating in a scheme to manipulate AIG's financial statements.

Some of the executives say they believed Buffett was involved and supported the deal that led to the charges. Buffett leads Berkshire Hathaway, drawing at least 25,000 people to his annual shareholder meetings.

"Buffett is an iconic figure," Reid Weingarten, attorney for one of the defendants, said at a pretrial hearing, according to a transcript. "He is known throughout the land as a person of great integrity."

But federal prosecutors accused defense attorneys in court papers of trying to create "a trial-within-a-trial about Warren Buffett." Prosecutors say they only named Buffett as a potential witness to rebut any suggestion by the defense that he was involved in or approved the deal.

U.S. District Court Judge Christopher F. Droney agreed Thursday to allow one of the defendants to present an exhibit during opening statements that lists Buffett as among those involved in the transaction. But Droney warned that he may later tell jurors to disregard such references if supporting evidence is not presented during the trial, or if the evidence was mischaracterized in the exhibits.

Buffett, who has not been charged with any wrongdoing, has said he was not briefed on how the transactions were to be structured or on any improper use or purpose of the transactions. His attorney, Ronald Olson, said in a recent statement that Buffett "denies that he passed judgment in any way" on the challenged deals.

Buffett has never testified at a criminal trial involving allegations of corporate fraud, Olson said.

At issue are two reinsurance transactions between AIG and Stamford-based General Re. Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

Prosecutors said the transactions were initiated by an AIG senior executive to quell criticism by analysts of a reduction in AIG's loss reserves in the third quarter of 2000. The indictment alleges that the aim was to make it appear as if AIG increased its loss reserves by about $500 million in 2000 and 2001, pacifying the analysts and investors and artificially boosting the company's stock price.