Federal prosecutors are investigating whether Berkshire Hathaway Inc.'s (BRKA, BRKB) General Reinsurance unit played a lead role in helping a professional- liability insurer hide details of its deteriorating financial situation, people familiar with the probe told Wednesday's Wall Street Journal.

Criminal investigators are probing whether General Re for more than a decade helped executives of the now-defunct Reciprocal of America disguise loans as reinsurance, the people said. Insurers use reinsurance to spread out their own risk.

Specifically, the people said, investigators want to know if General Re aided an alleged program to deceive state regulators and policyholders of the Richmond, Va., insurer with transactions dating to the early 1990s.

Until now, the Justice Department appeared to be concentrating on the actions of the executives of Reciprocal, which collapsed in 2003. Last month, the U.S. Attorney in Richmond announced plea bargains with two former Reciprocal executives tied to the alleged fraud.

Berkshire Hathaway, the holding company of billionaire investor Warren Buffett, said in a securities filing late Tuesday that it and General Re were cooperating "with the U.S. Attorney's investigation of Reciprocal of America." Berkshire added in the filing that General Re and four of its current and former employees, "including its former president," had received subpoenas in October 2003 in the matter. A Berkshire executive yesterday declined to name the individual and said the filing should have read "a former president."

-Wall Street Journal Staff Reporter Karen Richardson contributed to this story. Dow Jones Newswires 03-02-05 0521ET Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.