Chutes and ladders redux.

Warren Buffet’s Berkshire Hathaway announced Monday that Joseph Brandon had resigned as CEO of its General Re Corp. unit.

Federal prosecutors had been pressuring Berkshire to replace Brandon following the fraud convictions of four former Gen Re officers less than two months ago. Neither prosecutors nor the SEC ever charged Brandon with any wrongdoing. He cooperated with the government investigation, never asked for immunity, and in every way acted like a good corporate citizen. As recently as February, in a letter to shareholders, Buffet had praised Brandon as having helped to restore the “luster of the company.”

As I told Securities Law 360, this inappropriate and meddlesome effort at managing the human relations departments of American companies breaks new and dangerous ground for prosecutors. Berkshire Hathaway rightfully wanted to put the government’s criminal investigation behind it, and prosecutors wanted Brandon gone, despite his cooperation. By all accounts he did nothing wrong; otherwise, prosecutors surely would have charged him. The leverage the government exercises when it threatens to continue an investigation if personnel changes are not made is very powerful. Here, it appears that a hardworking, highly regarded corporate executive was thrown down the chute in service of an improper effort at let’s-climb-up-the-corporate-ladder. CR

Ladders and chutes.

Following the conviction earlier this year of four General Re executives on criminal fraud charges, federal prosecutors are trying to pressure Berkshire Hathaway into removing the current CEO, Joseph P. Brandon – despite the fact that neither the SEC nor any prosecutor has charged him with wrongdoing. After the trial, prosecutors said they would “work up the ladder” in an effort to clean up Dodge. But not only has Brandon cooperated with the investigation and prosecution of Gen Re executives, he has sought no immunity agreement for himself.

This is just flat-out the wrong thing for prosecutors to be doing. It should not be their business to hire and fire. However, in today’s post-Enron atmosphere, you see it all the time. Government prosecutors, regulators, and attorneys who represent the company or the company’s audit committee insist on a purge in order to trumpet a cleanup and remediation. In the case of Gen Re, not only did the guy they want to fire unselfishly cooperate with the effort to make things right, but by all accounts he was doing an excellent job as CEO. Just because you work your way up a ladder doesn’t mean you have to put a good guy on the outbound chute. CR