Warren Buffett, the most worshiped investor on the planet, is being accused of authorizing a sham reinsurance transaction to help American International Group (NYSE: AIG) cook its books. Meanwhile, more details of Buffett's proposed reinsurance deal for the bond insurance industry suggests he has not lost any of his business savvy.

Bloomberg News reports that a lawyer for Ronald Ferguson, former General Re CEO, accused Buffett of approving a sham reinsurance transaction to help AIG cook its books. The trial suggests that in 2000 General Re aided phony accounting at AIG, and Buffett has so far been avoiding testifying in this trial.

Prosecutors claim the deal fraudulently helped AIG add $500 million in loss reserves, a crucial indicator of an insurer's health. Ferguson, who reported to Buffett after Berkshire Hathaway (NYSE: BRK.A) bought General Re, is suggesting through his lawyer, Michael Horowitz, that Buffett knew details of the transaction and approved a $5 million fee that AIG paid to General Re.

Meanwhile, Buffett's plan to rescue bond insurers through reinsurance would offer Berkshire an enormous profit.

Warren Buffett just invested in a hopefully safer world. Along with CNN founder Ted Turner and former US Senator Sam Nunn, Warren Buffett has pledged $50 million to the International Atomic Energy Agency. Channelled through the Washington, D.C.-based Nuclear Threat Initiative, the money will be used to fund a nuclear fuel bank under the supervision of the IAEA. Countries such as Iran and North Korea will be discouraged from developing their own nuclear programs. Instead, these countries, as well as others, will have access to fuel-grade uranium that will be manufactured and stored according to strict international safety standards. Mr. Buffett is on the advisory board of the Nuclear Threat Initiative. He hopes the $50 million contribution will prod other governments, including the US, to provide an additional $100 million to support an international nuclear development and control program.

In other news related to Mr. Buffett, four additional former executives of Berkshire Hathaway subsidiary General Re were indicted on 20 September 2006 on charges that in 2000 they helped falsify financial data from huge insurance company AIG to make it look like AIG had higher loss reserves that it actually did. This false data was then used to manipulate AIG's stock price. Mr. Buffett testified during the preliminary phase before any indictments were handed down. He was not accused of any wrong doing. Three of the executives, Ronald Ferguson, Elizabeth Monrad, and Robert Graham, face possible sentences of 230 years in prison each as well as fines of up to $46 million apiece if convicted on all counts. A fourth executive, Christopher Garand, faces up to 160years in prison and fines totaling up to $29.5 million if convicted on all counts. The Department of Justice is being assisted in its prosecution by two other former General Re executives, John Houldsworth and Richard Napier, each of whom have already pled guilty to falsifying SEC documents. They are awaiting sentencing.

General Re was also in the news today for calling a shareholder meeting of its German subsidiary, Cologne Re. General Re already owns 95.2% of Cologne Re and wants to force recalcitrant shareholders to sell the remaining shares. The brief statement gives no explanation for the timing of the request for action nor a price for the remaining shares.