Whether by design or by accident, the big Warren Buffett news that most pess outlets focused on yesterday were his comments on the Kraft-Cadbury deal and the bank tax, not his company's $97.2 million settlement with the SEC on charges stemming from a transaction in which four GenRe executives were eventually convicted and sentenced to prison for fraud. The story was buried on page C2 of today's Wall Street Journal, and it didn't appear at all in the New York Times, which did post a blog item about it early this morning. Becky Quick didn't ask about it during her half-hour interview with Mr. Buffett on CNBC, nor did Bloomberg News's Betty Liu in her interview with Mr. Buffett. It's hard to think of another very rich business executive who could get in this much hot water with the government and still enjoy such a pure, folksy popular reputation.
The Wall Street Journal reports: "In a rebuke to Berkshire's hands-off approach with subsidiaries, prosecutors from the Justice Department's fraud section mandated that Berkshire's chief financial officer attend audit-committee meetings of General Re, and that General Re appoint an independent director." As a New York Sun editorial noted at the time, back in the annual letter Mr. Buffett issued to Berkshire Hathaway shareholders in 2005, the sage of Omaha had mocked the craze for "independent directors," writing, "In our view, based on our considerable boardroom experience, the least independent directors are likely to be those who receive an important fraction of their annual income from the fees they receive for board service (and who hope as well to be recommended for election to other boards and thereby to boost their income further). Yet these are the very board members most often classed as 'independent.'" Now the government thinks it knows how to govern a company better than Mr. Buffett does, which, given Mr. Buffett's overall performance as an investor-manager, is a bit of a stretch.
None of this is to say that Mr. Buffett himself did anything wrong in the GenRe transactions at issue, or that the SEC's prosecution is a reasonable one here. It is to say that it's newsworthy.