Buffett: Sokol's Actions Were 'Inexplicable,' 'Inexcusable'
April 30 2011 - 11:36AM
Dow Jones News
Berkshire Hathaway Inc. (BRKA, BRKB) Chairman Warren Buffett
said former executive David Sokol violated the company's
insider-trading rules and code of ethics in buying shares of
chemicals maker Lubrizol Corp. (LZ) before recommending that
Buffett buy the company outright.
Buffett said Sokol's actions were "inexplicable" and
"inexcusable," and said he was puzzled by the fact that Sokol
appeared to make no effort to hide his purchases, which indicated
he didn't think he was doing anything wrong.
"He essentially did it right out in the open," Buffett said
Saturday at Berkshire's annual shareholders meeting in Omaha, Neb.
"He was leaving a total record as to his purchases."
The comments were his first public remarks on Sokol's
resignation since Buffett announced the departure a month ago.
Sokol has said his decision to resign was unrelated to his
purchase of Lubrizol stock, which he bought for his personal
account after asking bankers to reach out to Lubrizol's chief
executive about a possible acquisition by Berkshire.
Berkshire later reached an agreement to buy Lubrizol, which
boosted the value of Sokol's investment by about $3 million.
On Saturday, Buffett told shareholders that Sokol once asked
that $12.5 million of compensation Buffett had earmarked to him be
given to his second in command at energy company MidAmerican.
In that context, Buffett said, he found it "inexplicable" that
"$3 million…would have led to the kind of troubles that it led
to."
A report by the audit committee of Berkshire's board of
directors, released earlier this week, said Sokol misled Berkshire
executives about the timing of his stock purchases and about how he
had become interested in the company.
An attorney for Sokol disputed several aspects of the audit
committee report.
In announcing Sokol's resignation, Buffett had praised Sokol's
work at Berkshire, and said he didn't believe his stock purchases
were illegal.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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