Risk Management

General Re CEO May Face SEC Charges

Joseph Brandon gets notified that the commission's staff is considering recommending a lawsuit against him based on its current probe of non-tradit...
Stephen TaubSeptember 9, 2005

The Securities and Exchange Commission is mulling civil charges against Joseph Brandon, chief executive officer of General Reinsurance Corp., that could bar him from serving as an officer of a public company, according to Berkshire Hathaway Inc., General Re’s parent company. The charges would stem from the SEC’s investigation of the use of finite insurance.

In a press release issued on Friday, Berkshire stated that Brandon received a “Wells notice” from the regulator informing him the SEC’s staff is considering recommending that the commission bring sue Brandon on charges that he violated or aided and abetted violations of the Securities Exchange Act of 1934.

The notice also states that the SEC may seek permanent injunctive relief, which would bar Brandon from serving as an officer or director of a public company and include disgorgement and civil penalties.

Under the commission’s procedures, Wells notice recipients can respond to the staff before it makes its formal recommendation on whether any civil action should be brought by the commission, Berkshire pointed out.

For at least the past few months, Federal prosecutors as well as regulators have been investigating Brandon’s role in a 2000 transaction between General Re and AIG, which resulted in AIG’s having to restate its financials and led two General Re executives to plead guilty to charges of criminal conspiracy and fraud, according to The Wall Street Journal.

The finite insurance transaction reportedly enabled AIG to boost loss reserves, but was deemed by regulators to be more akin to a loan than an insurance transaction.