Regulators are investigating whether AIG should have accounted for the transaction with General Re as a loan, rather than an insurance deal. Buffett is not a target of the inquiry, but regulators are still trying to determine the extent to which Berkshire knew, or should have known, that AIG was improperly accounting for the deal.
A Berkshire shareholder on Saturday asked what would happen if one side of a transaction accounted for a deal correctly but the other did not.
"That question may come up in a very real sense," Buffett responded. "Certainly if you know you are doing something that causes a company" to engage in fraud "you may have some serious obligation on that." But he added that Berkshire reinsures "hundreds of companies, and they all have legal departments and auditors."
Munger, a lawyer, said he believed the issue of whether one party to a transaction can be held responsible for another party's actions is "rife with ambiguity."
Buffett also offered kind words for ousted AIG chairman Hank Greenberg, who on April 12 invoked his Fifth amendment right against self-incrimination and declined to answer investigators' questions. "Hank Greenberg was the number one man in insurance," Buffett told shareholders. "He developed an extraordinary company in his lifetime."
During a lunch break, Ben Smeal, 27, a Berkshire investor from Salt Lake City, said he was pleased that Buffett addressed the AIG issue, even indirectly. "He said he wouldn't talk about it but then I think he went and said quite a bit," Smeal said.
Buffett's involvement in the investigation has been a hot topic in and around the Berkshire meeting. Berkshire's shareholders come year after year to listen to Buffett and Munger extol the virtues of value investing, buying strong companies and holding on to them.
The Berkshire annual meeting draws people of all ages from all corners of the world. Wil Harkey, 27, a former hedge fund investor, who has embraced value investing, said he felt the need to see Buffett before he retires. "I think it needs to be done at least once. Everyone is talking about how much longer he is going to be doing this."
The issue of who will succeed Buffett, 74, was a big topic in Omaha and all the chatter focused on one man: Microsoft Corp. founder Bill Gates, a friend of Buffett who was elected a Berkshire director Saturday. Buffett did not comment on the possibility of Gates taking over. He has said he will remain at the helm of Berkshire as long as his health allows.