Here’s what Munger had to say about Brandon, the year he resigned from General Re:
Q: Joe Brandon?
A: Can’t talk specifics in the midst of an on-going investigation. But I can say we stand behind every nice word we’ve said and written in the past few years about Joe. (Strong applause from scattered members of the audience. I’m guessing not many attendees knew the background on this question.)
And here’s what the WSJ said about Brandon, in an editorial after his resignation:
Eliot Spitzer is no longer on the prosecuting side of the criminal justice system. But his brand of extrajudicial punishment is alive and well among U.S. Attorneys. Take the case of former Gen Re CEO Joseph Brandon, who was forced to resign on Monday although he has not been charged with any crime and was by all accounts a superb manager.
Without insisting on any grant of immunity, Mr. Brandon cooperated in an investigation of a fraudulent reinsurance transaction between Gen Re and AIG. That investigation resulted in the convictions of one AIG employee and six Gen Re executives. Prosecutors wanted to make it seven and named Mr. Brandon an unindicted co-conspirator. But instead of charging Mr. Brandon and having to convince a jury of his guilt, they made it clear to Warren Buffett, Chairman of Gen Re parent Berkshire Hathaway, that Mr. Brandon had to go, according to various media reports.
For those not familiar with the events that led to Brandon’s resignation, he was the CEO of General Re when they set up a reinsurance transaction with AIG, a failing insurance company, that was thought to be a sham:
According to the SEC’s complaint against Gen Re, filed in U.S. District Court for the Southern District of New York, a foreign subsidiary of Gen Re entered into two sham “reinsurance” transactions with AIG in 2000 to improperly allow AIG to reverse the declining reserve trend and falsely report additions to both loss reserves and premiums written. Senior officials at Gen Re helped AIG structure the two sham transactions. The contracts show reinsurance transactions that appeared to transfer risk to AIG, but the transactions did not transfer risk.
https://www.sec.gov/news/press/2010/2010-10.htm
I take it from Munger’s comments at the time, and the WSJ editorial, and now Buffett’s comments today, that they do not believe that Brandon was involved in setting up or approving this sham transaction at the company he led.
dtb
