Legal News

Berkshire Dogged by Questions Following Sokol?s Departure

By Nathan Koppel

Berkshire Hathaway is supposed to be Mayberry and the Beavers all wrapped into one — a company largely devoid of the sort of alleged executive malfeasance that has sullied lesser lights.

But the sudden resignation of David Sokol, who was seen as the heir apparent to Warren Buffett, is raising questions about stock trading by Sokol.

Buffett announced in a press release about Sokol’s resignation that the former executive acquired nearly 100,000 shares of a chemicals company in January, before Berkshire reached a deal to acquire the company,  at the suggestion of Sokol, WSJ reports .

Berkshire’s purchase price boosted the value of Sokol’s stock holdings.

The SEC is reviewing the Berkshire press release and considering whether to launch an investigation, according to WSJ, citing a  person familiar with the matter.

It is unclear whether Sokol’s stock dealings fall within the terms of Berkshire’s conflicts of interest policy, which requires company executives to disclose material transactions to the company’s audit committee, according to WSJ.

The conflicts policy states: “When in doubt, remember Warren Buffett’s rule of thumb: ‘…I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper-to be read by their spouses, children and friends-with the reporting done by an informed and critical reporter.’”

Buffett said that he and Sokol feel that Sokol’s purchase of shares in the chemicals company, Lubrizol Corp, was not “in any way unlawful.” Sokol also told WSJ that his departure had nothing to do with Lubrizol.

Appearing on CNBC this morning, Sokol again denied wrongdoing. He said he did not aspire to be CEO of Berkshire and left because he likes to build companies, according to this CNBC blog of the interview. He ended the interview by wishing his granddaughter a happy birthday.

Full post as published by Law Blog - WSJ.com on March 31, 2011 (boomark / email).