WARREN BUFFET'S Berkshire Hathaway empire received dividends of approximately $180 million last year from Cologne Reinsurance Dublin, the IFSC company which played a key part in a big accounting scandal at insurance giant AIG.
The dividend payment, $137 million of which was transferred from shareholders' funds contributed by Cologne Re's immediate parent, General Reinsurance (GenRe), was made in a year in which in the business made a profit of $19 million. GenRe is ultimately owned by Berkshire Hathaway, Mr Buffett's investment vehicle.
Cologne Re Dublin remains in business solely to run off its existing reinsurance contracts, having stopped writing new business in 2005 after it became embroiled in regulatory inquiries in the US and Australia.
Newly filed accounts show that the company estimates that legal and other professional services arising from these investigations and the legal proceedings arising from them will ultimately cost the business $28.75 million. The company previously estimated such fees would amount to $12 million.
Last February, a US jury convicted five former insurance executives of fraud charges in relation to an illegal scheme to manipulate the finances of AIG with a "sham" reinsurance deal routed through Cologne Re. Those convicted included former Cologne Re Dublin director Christopher Garand, who was a senior vice-president of GenRe. Defence lawyers for Garand said at the time that he would appeal.
A former chief of the IFSC company, John Houldsworth, was one of two main prosecution witnesses in the case. Houldsworth previously pleaded guilty to conspiring to abet false accounting at AIG.
The latest annual accounts for Cologne Re Dublin indicated that a preliminary evaluation of the AIG transactions by the Office of the Director of Corporate Enforcement has yet to be concluded. In addition, the accounts say the company "is also providing information to the Irish Financial Services Regulatory Authority and other regulators" for their inquiries into the company's activities.
A report last year for the Australian Prudential Regulation Authority said Cologne Re Dublin had support from the highest level of General Re Corporation when taking a prime role in three "improper" deals involving New Cap Reinsurance, FAI Insurance and Zurich Australia.
