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31-03-2011, 09:30 AM
Warren Buffett's heir-apparent steps down
08:05 AM Mar 31, 2011
NEW YORK - One of Warren Buffett's favoured lieutenants - seen as his leading heir apparent - resigned after buying shares in a company he later recommended that Mr Buffett acquire.
Mr David Sokol's resignation from his roles as chairman of Berkshire Hathaway units MidAmerican Energy and NetJets raised questions about the transparency of his dealings with Mr Buffett - namely whether he concealed the size of share purchases in Lubrizol.
The resignation could be a reputational blow for Mr Buffett, the 80-year-old "Oracle of Omaha", who recently sealed a US$9-billion (S$11.4-billion) deal for Lubrizol at Mr Sokol's urging.
"Obviously Warren Buffett prides himself on transparency and this would not appear to be transparent," said Berkshire shareholder Michael Yoshikami. "It just seems so unnecessary."
Mr Buffett said yesterday that Mr Sokol bought shares of Lubrizol last December, sold them, then bought more shares in early January. He subsequently presented Mr Buffett with the idea of buying the company.
The 96,060 shares Mr Sokol bought from Jan 5 to 7 would have generated a profit for him of at least US$2.98 million based on Lubrizol's share price over those three days and the price at which Mr Buffett agreed to buy the company.
It is unclear why news of Mr Sokol's trading is surfacing now. The US Securities and Exchange Commission and the Department of Justice have declined to comment on the issue.
Mr Buffett said he was originally not in favour of the idea of buying Lubrizol but warmed to it after Mr Sokol told him of a conversation with Lubrizol's chief executive. Berkshire announced its purchase of Lubrizol for US$135 per share, a 28-per-cent premium, on March 14.
Legal experts were divided on whether Sokol could be held liable in court for his actions.
"He could be. At a minimum he showed extremely bad judgment in not disclosing to Mr Buffett that he had taken a fairly significant position in the company a week before he pitched the benefits of the company to Mr Buffett," said law firm partner C Evan Stewart.
But others said there was the possibility the sequence of events could be explained away.
Said lawyer Stuart Slotnick: "Buffett's job is to purchase stock and companies. If Sokol goes to Buffett and says, 'I love this stock, I bought some for myself, you should look at it,' there's nothing inappropriate in Buffett doing his own analysis and making a purchase, as long as no trading decisions are made on the basis of material, nonpublic information." REUTERS
08:05 AM Mar 31, 2011
NEW YORK - One of Warren Buffett's favoured lieutenants - seen as his leading heir apparent - resigned after buying shares in a company he later recommended that Mr Buffett acquire.
Mr David Sokol's resignation from his roles as chairman of Berkshire Hathaway units MidAmerican Energy and NetJets raised questions about the transparency of his dealings with Mr Buffett - namely whether he concealed the size of share purchases in Lubrizol.
The resignation could be a reputational blow for Mr Buffett, the 80-year-old "Oracle of Omaha", who recently sealed a US$9-billion (S$11.4-billion) deal for Lubrizol at Mr Sokol's urging.
"Obviously Warren Buffett prides himself on transparency and this would not appear to be transparent," said Berkshire shareholder Michael Yoshikami. "It just seems so unnecessary."
Mr Buffett said yesterday that Mr Sokol bought shares of Lubrizol last December, sold them, then bought more shares in early January. He subsequently presented Mr Buffett with the idea of buying the company.
The 96,060 shares Mr Sokol bought from Jan 5 to 7 would have generated a profit for him of at least US$2.98 million based on Lubrizol's share price over those three days and the price at which Mr Buffett agreed to buy the company.
It is unclear why news of Mr Sokol's trading is surfacing now. The US Securities and Exchange Commission and the Department of Justice have declined to comment on the issue.
Mr Buffett said he was originally not in favour of the idea of buying Lubrizol but warmed to it after Mr Sokol told him of a conversation with Lubrizol's chief executive. Berkshire announced its purchase of Lubrizol for US$135 per share, a 28-per-cent premium, on March 14.
Legal experts were divided on whether Sokol could be held liable in court for his actions.
"He could be. At a minimum he showed extremely bad judgment in not disclosing to Mr Buffett that he had taken a fairly significant position in the company a week before he pitched the benefits of the company to Mr Buffett," said law firm partner C Evan Stewart.
But others said there was the possibility the sequence of events could be explained away.
Said lawyer Stuart Slotnick: "Buffett's job is to purchase stock and companies. If Sokol goes to Buffett and says, 'I love this stock, I bought some for myself, you should look at it,' there's nothing inappropriate in Buffett doing his own analysis and making a purchase, as long as no trading decisions are made on the basis of material, nonpublic information." REUTERS
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