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The Glorious German €643 Million Scam On Warren Buffett’s Berkshire Hathaway

Around here we’re rather aficionados of the scam. We have to be, having – well, one of us at least – worked in the Russian metals industry for a decade. A sense of humour about the things that people will try to do to steal money was rather a necessity in that environment.

Perhaps my favourite was actually in the United States. A bloke was claiming to be able to do that old dream, turning lead into gold. The specific method was low energy transmutation which was a load of old cobblers. But there was a much, much, easier manner of working out that it was a scam. He was looking for investment. And if you can turn lead – $400 a tonne – into gold – $2,000 an ounce and thus $66 million a tonne at the time – then what the hell do you need investment for? It took a very long time to get that point over to a starry eyed potential investor who happened to be my boss at the time.

Which brings us to the scam perpetrated on Warren Buffett’s Berkshire Hathaway company:

Warren Buffett, world’s fourth wealthiest man has been swindled by a German manufacturing company of €643million

There is an amusement that that report comes from a Nigerian outlet. Presumably domestic such have now been stopped and it’s necessary to look internationally for examples. It’s also not the first time such has happened:

DC Solar built mobile solar generators for sporting events and music festivals. The company attracted at least a dozen investors in complex deals that raised money through what’s known as tax-equity funds. They included Progressive Corp., East West Bancorp Inc., Valley National Bancorp and Sherwin-Williams. Warren Buffett’s company invested US$340 million.

DC Solar, however, built and leased only a fraction of the roughly 17,000 mobile units it claimed were in use, authorities said. Instead, DC Solar used money from new investors to pay off old ones, according to a statement from the U.S. Attorney’s Office in Sacramento.

$340 million into a Ponzi scheme, eh? But today’s example is fromGermany:

Precision Castparts Corp, a unit of Warren Buffett’s Berkshire Hathaway Inc, has been awarded 643 million euros ($700 million) in arbitration for having been fraudulently induced to buy a German maker of pipes and fittings.

So, they wanted to buy the company. How much should they pay? Well, have a look at the accounts, obviously:

Internal documents cited by the German newspaper Handelsblatt suggest some of Wilhelm Schulz’s employees inflated the company’s Ebitda – earnings before interest, tax, depreciation and amortisation – by simply scanning in letterheads of third companies and Photoshopping them to create fake orders and invoices.

At least 47 business deals that had helped create the impression of a company on the up were completely fabricated, said Handelsblatt.

Pretty simple really. But as that other German laddies said if you’re going to lie about something go big.

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3 years ago

Gotta’ check those bank statements. Deposits should match up with invoices. A decent sampling would catch that scam.

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