Warren Buffett’s Berkshire Hathaway investment vehicle is being investigated over a potential conflict of interest between its part-ownership of the Moody’s credit ratings agency and his newly formed local government bond insurer.

Richard Blumenthal, the attorney-general for the state of Connecticut, said that he was examining the “clear and direct conflict of interest for Moody’s to rate a company owned by such a significant shareholder”.

Moody’s gave its top rating last week to Berkshire Hathaway Assurance, the bond insurer Mr Buffett has set up to take new business from struggling local government securities underwriters.

At a time when many bond insurers have had ratings downgrades, or are in danger of receiving them, the top AAA rating gives Mr Buffett’s new operation an advantage, Mr Blumenthal said.

“We have been aware of this issue and it has been very actively and immediately involved in our investigation,” Mr Blumenthal told Bloomberg News, referring to a continuing competition inquiry of the ratings companies.

Mr Buffett, the world’s richest man, started the bond insurer in December after a request by New York state insurance regulators.

Many of the bond insurers had been badly hit by the surge in claims relating to the mortgage securities they underwrote and the regulators were worried that the ability of local government to raise money would be severely hampered if the existing insurers could no longer guarantee new “municipal” bonds.

Mr Blumenthal’s investigation comes in the week that Mr Buffett helped to finance the agreed $23 billion (£11.6 billion) takeover of Wrigley by Mars in a deal that would hand him a half-price stake in the group.

Mr Buffett, who has about $40 billion of cash at his disposal at a time when the credit markets have largely dried up, lent Mars $4.4 billion of the money it needed.

He also invested $2.1 billion directly in the transaction, receiving a 19 per cent stake in the group, which was about half the price paid to Wrigley shareholders, in return for his financing and deep knowledge of the food industry.

Mr Buffett is likely to face questions about Mr Blumenthal’s inquiry and the Wrigley acquisition at the group’s annual meeting tomorrow, when 30,000 people are expected to cram into the Qwest Centre in Omaha, Nebraska.

The audience, thought to be the largest convened for a financial meeting, will watch as the 77-year-old “Sage of Omaha” answers questions in a session that usually lasts for most of the day. Mr Buffett will be flanked by his vice-chairman, Charlie Munger, 84, at the weekend-long event, known as Woodstock for Capitalists.

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