David Sokol is the man thought to be Warren Buffett’s successor at Berkshire Hathaway. He bought $10 Million shares in Lubrizol at $104 per share about less than three months before before Buffet invested $9 BILLION in the company at $135 per share. Sokol has resigned with insider trading claims swirling. He said he did nothing wrong, and there is nothing unusual about his $3 Million profit, all of it on paper as far as anyone knows. The Oracle of Omaha also says Sokol has done nothing wrong. See a video below.
Experts said that part of the problem may be that Buffett’s company, Berkshire Hathaway, has few of the internal controls that other major companies have, and instead banks on the honour of its senior employees.
‘It’s the kind of behaviour that, as a matter of corporate governance, sophisticated companies try to avoid,’ said John Coffee, a law professor at Columbia University.
Last Fall Sokol reportedly asked CitiGroup for a list of possible buys which he would present to Warren Buffet. In early January 2011 Sokol purchased 96,000 shares with his own funds, and placed an order to purchase another 100,000 shares at $104 per share. A week later, so the story goes, he suggested Buffet should invest in the company. Buffet did not buy then, but Sokol continued to keep Buffet updated about Lubrizol’s “finances.” By March 11th, Buffet was in, purchasing $9 BILLION worth of shares at $135.00.
Sokol says he has never had any authority to purchase in the name of Berkshire, and merely presented what he thought was a successful company to his boss. In this interview, Sokol said if he could redo the whole thing, he would buy Lubrizol for himself and not mention it to Buffet, who he did not expect to buy so quickly. He said he had, and has, no insider information.
In the video below, Sokol says he has been thinking of resigning for a couple of years to put together his own mini-Berkshire Hathaway; Buffet has talked him out of it a couple of times, and there is nothing more to his resignation than that. Sokol generously says the company is “fortunate” to have Buffet.
David Sokol on Resigning Berkshire Hathaway (video)