8-KOther Events

BERKSHIRE HATHAWAY INC 8-K Report, Corporate Update (Jan 20, 2010)

Filed January 20, 2010For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. (BRK-B) has filed an 8-K report detailing settlements reached by its wholly-owned subsidiary, General Re Corporation, with the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). These settlements conclude investigations into non-traditional products previously disclosed by Berkshire. General Re entered into a non-prosecution agreement with the DOJ, agreeing to pay $19.5 million to the U.S. government and a further $60.5 million (exclusive of fees) as part of a civil class action settlement related to transactions with American International Group (AIG) in 2000. This payment satisfies restitution for the AIG transaction, and General Re has agreed to continued cooperation with ongoing investigations into individuals involved. In parallel, General Re settled with the SEC concerning the AIG transaction and separate transactions with Prudential Financial, Inc. The SEC settlement includes a permanent injunction against aiding and abetting violations of books and records and internal controls provisions. General Re will pay $12,221,398 in disgorgement and prejudgment interest. Importantly, Berkshire stated that it is not aware of any remaining U.S. federal or state governmental investigations of its subsidiaries involving non-traditional products following these agreements. The company acknowledges that these settlements are subject to court approval for the SEC component.

Key Highlights

  • 1General Re Corporation, a subsidiary of Berkshire Hathaway, reached settlements with the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
  • 2These settlements resolve investigations into non-traditional products previously disclosed by Berkshire Hathaway.
  • 3General Re entered into a non-prosecution agreement with the DOJ, paying $19.5 million to the U.S. government.
  • 4General Re will also pay $60.5 million (excluding fees) as part of a civil class action settlement related to a 2000 transaction with AIG, satisfying restitution requirements.
  • 5The SEC settlement involves a permanent injunction against General Re for aiding and abetting violations of books and records and internal controls provisions.
  • 6General Re agreed to pay $12,221,398 in disgorgement and prejudgment interest to the SEC.
  • 7Berkshire Hathaway stated that it is unaware of any further U.S. federal or state governmental investigations regarding non-traditional products following these settlements.

Frequently Asked Questions

This 8-K filing serves to inform investors that Berkshire Hathaway's subsidiary, General Re Corporation, has reached settlements with the U.S. Department of Justice and the Securities and Exchange Commission, effectively concluding investigations into certain non-traditional financial products.

General Re will pay a total of $19.5 million to the U.S. government under the DOJ non-prosecution agreement and $12,221,398 in disgorgement and interest to the SEC. Additionally, General Re is contributing $60.5 million (exclusive of fees) to a civil class action settlement related to a past AIG transaction. While significant, these amounts are expected to be managed within Berkshire's substantial financial resources.

According to the filing, following these settlements, Berkshire Hathaway is not aware of any remaining U.S. federal or state governmental investigations of any of its subsidiaries involving non-traditional products or related transactions.

The SEC settlement permanently enjoins General Re from aiding and abetting violations related to books and records and internal controls provisions. General Re has agreed to pay $12,221,398 in disgorgement and prejudgment interest and has also agreed not to publicly deny the allegations in the SEC's complaint.