Berkshire Hathaway 2005 Annual Report Download - page 53

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Notes to Consolidated Financial Statements (Continued)
(22) Contingencies and Commitments (Continued)
2005. The Special Master appointed by the court heard arguments on July 13, 2005 and recommended denial of the motion on July
22, 2005. On July 22, 2005, the Court denied General Reinsurance’ s motion to dismiss. General Reinsurance filed and served its
answer and affirmative defenses to the Amended and Restated Complaint on September 1, 2005. Discovery has begun. The second
suit, also filed in the Circuit Court of Montgomery County, was initiated by Baptist Health Systems, Inc. (“BHS”), a former member
of AHAT, and alleged claims identical to those in the initial AHA Action, plus claims for breach of fiduciary duty and wantonness.
These cases have been consolidated for pretrial purposes. BHS filed its First Amended Complaint in April 2005, alleging violations
of the Alabama Securities Act, conspiracy, fraud, suppression, breach of fiduciary duty, wantonness and unjust enrichment against
General Reinsurance. General Reinsurance filed a motion to dismiss all counts of the Amended and Restated Complaint in May
2005. The Special Master heard arguments on July 13, 2005, and on July 22, 2005, recommended dismissal of the claim under the
Alabama Securities Act, but recommended denial of the motion to dismiss the remaining claims. On July 22, 2005, the Court denied
General Reinsurance’ s motion to dismiss. General Reinsurance filed and served its answer and affirmative defenses to the Amended
and Restated Complaint on September 1, 2005. Discovery has begun. The AHA Action and the BHS complaint claim damages in
excess of $60 million in the aggregate as against all defendants.
Actions related to AIG
General Reinsurance received a Summons and a Consolidated Amended Class Action Complaint on April 29, 2005, in the
matter captioned In re American International Group Securities Litigation, Case No. 04-CV-8141-(LTS), United States District
Court, Southern District of New York. This is a putative class action asserted on behalf of investors who purchased publicly-traded
securities of AIG between October 1999 and March 2005. On June 7, 2005, General Reinsurance received a second Summons and
Class Action Complaint in a putative class action asserted on behalf of investors who purchased AIG securities between October
1999 and March 2005, captioned San Francisco Employees’ Retirement System, et al. vs. American International Group, Inc., et al.,
Case No. 05-CV-4270, United States District Court, Southern District of New York. At a July 2005 conference, the court ruled that
the plaintiffs in case no. 04-CV-8141 would be lead plaintiffs. On September 27, 2005, the plaintiffs in case no. 04-CV-8141 filed a
Consolidated Second Amended Complaint (the “Complaint”). The Complaint asserts various claims against AIG, and various of its
officers, directors, investment banks and other parties. Included among the defendants are General Reinsurance and Messrs.
Ferguson, Napier and Houldsworth (whom the Complaint defines as the “General Re Defendants”). The Complaint alleges that the
General Re Defendants violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated under that Act through
their activities in connection with the AIG transaction described in “Governmental Investigations,” above. The Complaint seeks
damages and other relief in unspecified amounts. The General Re Defendants have moved to dismiss the Complaint on the grounds
that it fails to state a claim on which relief can be granted against these defendants. The motion is scheduled to be heard on April 17,
2006. No discovery has taken place.
On July 27, 2005, General Reinsurance received a Summons and a Verified and Amended Shareholder Derivative Complaint
in In re American International Group, Inc. Derivative Litigation, Case No. 04-CV-08406, United States District Court, Southern
District of New York, naming “Gen Re Corporation” as a defendant. It is unclear whether the plaintiffs are asserting claims against
General Reinsurance or its parent, General Re. This case is assigned to the same judge as the class actions described above. The
complaint, brought by several alleged shareholders of AIG, seeks damages, injunctive and declaratory relief against various officers
and directors of AIG as well as a variety of individuals and entities with whom AIG did business, relating to a wide variety of
allegedly wrongful practices by AIG. The allegations against “Gen Re Corporation” focus on the late 2000 transaction with AIG
described above, and the complaint purports to assert causes of action against “Gen Re Corporation” for aiding and abetting other
defendants’ breaches of fiduciary duty and for unjust enrichment. The complaint does not specify the amount of damages or the
nature of any other relief sought against “Gen Re Corporation.” In August 2005, General Reinsurance received a Summons and First
Amended Consolidated Shareholders’ Derivative Complaint in In re American International Group, Inc. Consolidated Derivative
Litigation, Case No. 769-N, Delaware Chancery Court. The claims asserted in the Delaware complaint are substantially similar to
those asserted in the New York derivative complaint described earlier in this paragraph, except that the Delaware complaint makes
clear that the plaintiffs are asserting claims against both General Reinsurance and General Re. Proceedings in both the New York
derivative suit and the Delaware derivative suit are stayed until May 1, 2006.
FAI/HIH Matter
In December 2003, the Liquidators of both FAI Insurance Limited (“FAI”) and HIH Insurance Limited (“HIH”) advised GRA
and Cologne Re that they intended to assert claims arising from insurance transactions GRA entered into with FAI in May and June
1998. In August 2004, the Liquidators filed claims in the Supreme Court of New South Wales in order to avoid the expiration of a
statute of limitations for certain plaintiffs, but neither GRA nor Cologne Re have been served with legal process by the Liquidators.
The focus of the Liquidators’ allegations against GRA and Cologne Re are the 1998 transactions GRA entered into with FAI (which
was acquired by HIH in 1999). The Liquidators contend, among other things, that GRA and Cologne Re engaged in deceptive
conduct that assisted FAI in improperly accounting for such transactions as reinsurance, and that such deception led to HIH’ s
acquisition of FAI and caused various losses to FAI and HIH.
Insurance Brokerage Antitrust Litigation
Berkshire, General Re and General Reinsurance are defendants in this multi-district litigation, In Re: Insurance Brokerage
Antitrust Litigation, MDL No. 1663 (D.N.J.). In February 2005, the Judicial Panel on Multidistrict Litigation transferred several
different cases to the District of New Jersey for coordination and consolidation. Each consolidated case concerned allegations of an
industry-wide scheme on the part of commercial insurance brokers and insurance companies to defraud a purported class of insurance