Warren And Hank Are Set For A Grilling

When Buffett and Greenberg meet with Spitzer and the feds, old feuds may flare

Warren E. Buffett and Maurice "Hank" Greenberg have styles as different as an elephant and a lion. Buffett is known for his down-home, revival-style shareholder meetings and folksy musings. The imperious Greenberg is far more secretive yet blunt. Now, with probes into a questionable reinsurance deal between Greenberg's American International Group Inc. (AIG ) and Buffett's General Re Corp. insurance subsidiary moving into high gear, those differences are coming into full view.

On Apr. 11 and Apr. 12, Buffett and Greenberg, respectively, are scheduled to appear for interviews with investigators from New York Attorney General Eliot Spitzer's office, the Securities & Exchange Commission, and the Justice Dept. People close to the investigation say Buffett, who feuded with Greenberg years ago, has cooperated fully with regulators over the past weeks. "Some Buffett execs say he dislikes Greenberg from the old days," says one source. "Buffett's only too happy to let us know precisely how reinsurance can be used both properly and improperly." Buffett did not return a phone call seeking comment. Others contend that Buffett and Greenberg, though competitive, have long had a healthy respect for one another. David Schiff, who edits Schiff's Insurance Observer and has written copiously about both AIG and Berkshire Hathaway Inc., (BRK.A ) the parent of General Re, says it's likely that Buffett is cooperating with regulators to protect his own company and reputation. "It's not personal," he says.

Still, it's not as if the pair have always had smooth relations. People who know both men say their sometime-animosity stems from one of Buffett's famous annual letters to his investors -- this one circa 1985 -- in which Buffett indirectly criticized AIG's use of reinsurance. He labeled a certain AIG practice "the lay-it-off-at-a-profit game." Greenberg was furious and retorted to Barron's at the time: "Buffett may be a good investor, but he's no insurance man. He has a peanut-sized book of business and only writes business in good times. He has never innovated one new product." The two eventually patched things up and came to work together in the poker-like spheres of high finance for years. In 1998 they attempted to join forces to buy out fallen hedge fund Long-Term Capital Management together. Still, the two continued to duke it out in the insurance arena. In 2002, Schiff's compared Berkshire Hathaway's transparency to AIG's murkier finances and ran a cartoon of Greenberg and Buffett arm-wrestling over their companies' might.

Insurance experts are wondering if the rendezvous with regulators will turn into a showdown between the two icons. Buffett is bringing his in-house lawyer to the interview, says a source close to the investigation. Greenberg, by contrast, has hired outside legal counsel -- prominent attorney David Boies -- to represent him. Buffett has "volunteered" to appear before regulators, according to his company. As for Greenberg, some are wondering if he'll exercise his Fifth Amendment rights. Even so, "we're preparing as though he's coming in," says a source close to the investigation. "Boies has been saying in recent days that Hank has nothing to hide." It's possible that Greenberg, a famously hands-on manager intimately involved in the most minute details at AIG, could be criminally charged for his actions at AIG, says a source involved in the probe. Boies did not return a phone call seeking comment.

By contrast, Buffett -- widely known as a hands-off manager who was seemingly unaware of the particulars surrounding the General Re/AIG transactions -- is likely to be off the hook, says the same source. "You don't know who's swimming naked until the tide goes out," Buffett once mused. In the tête à têtes with Spitzer & Co., who knows what will be revealed?

By Marcia Vickers in New York

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