DAVID SOKOL, once a candidate to succeed Warren Buffett as the head of Berkshire Hathaway, has resigned as it was disclosed he helped to negotiate a takeover while buying stock in the target company.
Mr Sokol (54) bought about 96,000 Lubrizol shares in January before recommending the company as a takeover target, Mr Buffett, Berkshire’s chairman and chief executive officer, said in a statement. Mr Sokol had initiated confidential talks with Lubrizol the month before. Berkshire agreed to buy the firm for $9 billion on March 14th.
Mr Buffett (80) has relied on Mr Sokol as a manager and a dealmaker for more than a decade. The billionaire, who has been planning his succession, is awaiting approval from regulators and shareholders for the Lubrizol deal.
Enforcement lawyers at the Securities and Exchange Commission were reviewing Mr Buffett’s statement and discussing the matter internally, according to one person with knowledge of the talks.
“The SEC is going to look at that deal to check for insider buying and selling, so if there’s an issue the time to clean it up is now,” said Daniel Genter, president of RNC Genter Capital Management in Los Angeles, which oversees about $3.7 billion.
Mr Sokol was chairman of Berkshire’s MidAmerican Energy Holdings and its roofing unit Johns Manville. He was also chief executive of NetJets, Berkshire’s luxury-flight subsidiary.
Sokol bought 96,060 Lubrizol shares on January 5th, 6th and 7th, less than two weeks before proposing that Berkshire buy the company, Mr Buffett said.
The purchases may have given him a profit of about $3 million, according to Mr Buffett’s disclosure and Bloomberg calculations.
Mr Sokol’s compensation from MidAmerican totalled $59.5 million in the last five years, according to the unit’s SEC filings.
“It’s just a classic case of someone not fitting into that Buffett culture,” said Lawrence McDonald, president of McDonald Advisory Group in New York. “That’s the type of thing you might do at another hedge fund, but you don’t do it at Berkshire.”
Mr Buffett said in the statement that he thought Mr Sokol’s stock purchases were legal.
Mr Sokol said he didn’t trade on inside information, according to a statement from Fox Business Network. – (Bloomberg)
