Update 1:07am MST, Apr 1, 2011: “CNBC TRANSCRIPT: David Sokol Defends His Controversial Lubrizol Stock Purchases“
Update 8:57pm MST, March 31: Bloomberg, “Buffett Misses Chance to Show Moral Courage: Alice Schroeder“
Update 9:17am MST: CNBC, “Sokol to CNBC: I Shouldn’t Have Told Buffett I Liked Lubrizol” (with extensive video interview of Sokol)
NYT DealBook entry after Sokol CNBC appearance, “The Perception of the Sokol Situation“
Watch the CNBC Sokol interview first, Bloomberg TV interview, “Jeffrey Matthews Interview on Sokol, Buffett”
CNBC, “LIVE BLOG – David Sokol’s Live Interview on CNBC’s Squawk Box”
Today is not a good day for Warren Buffett or Berkshire Hathaway shareholders.
* Here is the unusual statement/official news release “Warren E. Buffett, CEO of Berkshire Hathaway – Announces the Resignation of David L. Sokol” (PDF file)
Paradoxically, the most damaging bit may be the second last paragraph, “I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release.” To me, this is in full prep mode to fight with lawyers (SEC lawyers, et al). A totally silence after issuing such an “unusual” statement is asking for serious headline news trouble! (see more excerpt at the end) I hope I am wrong here.
* NYT DealBook, “Abrupt Exit for a Top Deputy to Warren Buffett“
* CNBC Warren Buffett Watch, “Surprise Resignation of Leading Buffett Successor Raises Unanswered Questions” (with video)
* More excerpt from the official news release,
“Finally, Dave brought the idea for purchasing Lubrizol to me on either January 14 or 15. Initially, I was unimpressed, but after his report of a January 25 talk with its CEO, James Hambrick, I quickly warmed to the idea. Though the offer to purchase was entirely my decision, supported by Berkshire’s Board on March 13, it would not have occurred without Dave’s early efforts.
That brings us to our second set of facts. In our first talk about Lubrizol, Dave mentioned that he owned stock in the company. It was a passing remark and I did not ask him about the date of his purchase or the extent of his holdings.Shortly before I left for Asia on March 19, I learned that Dave first
purchased 2,300 shares of Lubrizol on December 14, which he then sold on December 21. [Note: Hmm, I don't have the daily price range for the two dates but based on closing prices, they seem about the same.] Subsequently, on January 5, 6 and 7, he bought 96,060 shares pursuant to a 100,000-share order he had placed with a $104 per share limit price. [Note: It is about $10 million and these group of shares have obviously gone up since the take over bid offer.]
Dave’s purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea. In addition, of course, he did not know what Lubrizol’s reaction would be if I developed an interest. [Note: Warren, are you serious?!!]“
Strangely, the least of the problem/question is whether the Lubrizol deal is still a good deal?
According to CNBC, Sokol will appear on CNBC Thursday March 31st at 7:30am.
For the record from WSJ “Buffett Jolted as Aide Quits” an ironic old Buffett quote in emphasis,
“A conflicts of interests section in Berkshire’s “Code of Business Conduct and Ethics” posted on its website says a chief executive of a Berkshire subsidiary, whch Mr. Sokol was, “shall disclose any material transaction or relationship that reasonably could be expected to give rise to such a conflict to the Chairman of the Company’s Audit Committee. No action may be taken with respect to such transaction or party unless and until such action has been approved by the Audit Committee.” Mr. Buffett is not the audit committee’s chairman. It is unclear whether Mr. Sokol’s actions would have fallen under this policy.
The policy on the website also 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.’”“
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