As we begin part 2 of our series detailing the fraud known as “the greatest investor in the world,” we want to open with a developing story out of Omaha this week. Warren Buffet was asked to comment about the Wells Fargo banking fraud scandal; remember the company he owns about 10% of? Well Ole Warren belched out a doozy; he is not going to comment on the matter until November. That’s interesting, that also happens to be after the election for President and congress will be decided. Great leadership, I would love to work for him, be directly involved in fraud and not have to suffer any consequences. Maybe if Hillary wins the election she will put him in charge of the Department of Justice? One could argue he would actually be better than either of the two that served as head of the DOJ under President Obama.
Maybe Buffett will care to comment on this scandal emulating from his subsidiary Berkshire Hathaway Applied Underwriters. A bicycle courier company is suing the snake from Omaha’s company after being duped by their workers compensation so called insurance policy bought through Berkshire Hathaway. The company—Breakaway Courier Company—that is suing Buffett calls the policy they bought a reverse Ponzi-scheme. Insurance—as most people know—is paid by an individual or corporation to minimize or transfer risk. Workers compensation insurance carries very steep premiums as a result of worker misclassification and fraud that occurs regularly. In this case, Breakaway Courier paid in over $863,000 in premiums over the years and they were promised by Buffett’s conglomerate that the premium was being placed in a “cell” which means they would get the money back if not used to pay claims. So in essence, companies were covering each other’s losses, and Breakaway found out the money was not going to be returned as promised.
Here is an excerpt from Bloomberg Markets;
In the lawsuit, Breakaway Courier Corp. accused Omaha, Nebraska-based Berkshire of creating what it called a “reverse Ponzi scheme” that requires workers’ compensation customers to cover each other’s losses. According to the complaint in state court in New York, companies are led to believe their premiums are being paid into “protected cells” and will eventually be returned to them.
“Instead, Berkshire Hathaway illegally siphons off premiums,” leaving “employers and injured workers without the funds that New York State requires to be available to cover losses,” according to the complaint.
Oh it gets much better folks, the Department of Insurance in; Wisconsin, California, and Vermont have banned further sale of these policies saying they duped the companies that bought them. It’s worse, in California you are required to get approval for all insurance premium rates by the commissioner, but apparently not Buffett, he is too big to fail.
“California’s insurance commissioner ruled against Berkshire in June over workers’ compensation policies after determining that the company duped a small business, Shasta Linen Supply, and circumvented a review of rates. Earlier this month, the company agreed to stop selling the policies in dispute in California. The regulator said the Berkshire businesses charged customers’ rates which hadn’t been approved by the regulator.”
No surprise here either, when asked to comment about this small matter of being honest, Buffett had no comment. Hopefully Hillary will bail him out and make all this go away? This scheme actually runs through multiple shell companies set up by Buffett so he could pocket money during each transaction and buy stock in companies like Wells Fargo. Typically, Buffett wants to profit at every point of the transaction, not just the final product. Pretty awesome job ripping off a small business of 63 based in Sacramento ole Warren. Is this the type of thing you and Charlie Munger speak about during your annual meeting?
X has the 3rd installment ready to go as well, once again targeting subsidiaries of Buffett; Clayton Homes and Vanderbilt Mortgage. Get in the underground bunker Buffett fans, the A-bomb is about to drop.
Til next week “X”