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BERKSHIRE HATHAWAY

Billionaire's reputation buffeted by investigations
By Peter Robison
Bloomberg News

June 5, 2005

Warren Buffett, the second-richest American, lives in a $700,000, five-bedroom house on a maple-lined street in Omaha, Neb. Neighbor Mike McMullen says he sometimes sees Buffett, 74, warming up his Lincoln on winter mornings. The license plate reads: "Thrifty."

Four decades after Buffett bought Berkshire Hathaway Inc., now a holding company worth $129.9 billion, his reputation for honesty and openness is threatened as never before by a wave of federal, state and international investigations of Berkshire's General Re Corp., the largest U.S. reinsurer.

"I know it bothers Warren a lot," says Robert Soener, 80, a retired Omaha stockbroker and Berkshire investor who has been a friend of Buffett since the 1950s when the two taught an investment class at the University of Nebraska at Omaha. "Even if he comes out -- and I know he will -- clean as a whistle, there's still going to be that stigma, not to the stockholders, but to the outside."

Shareholders say they worry that the premium Buffett brings to Berkshire's bonds and stock may be eroding. The company's borrowing costs are rising, and shares have fallen 4 percent this year.

Investors have had a spectacular ride since Buffett took control of Berkshire on May 10, 1965. A $10,000 investment that day would be worth about $47 million today. Berkshire shares have had a compound annual return of 23.5 percent over the past four decades, more than triple the 6.8 percent price appreciation of the Standard & Poor's 500 Index. Soener's stock comes from $15,000 his mother invested with Buffett in the 1950s. He wouldn't say how much the shares are worth now or if he'd sold any.

Now, New York Attorney General Eliot Spitzer, the Securities and Exchange Commission and the Justice Department are examining reinsurance deals of Stamford, Conn.-based General Re.

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