David Sokol, Supposed Successor To Buffett Resigns From Berkshire, Possible Lubrizol Frontrunning Implicated

Tyler Durden's picture

The brain behind the Lubrizol acquisition resigns unexpectedly, and the strangest press release-cum-letter from Buffett follows: "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. 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. 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." Frontrunning? We won't know - the kindly Octogenarian of Omaha will say no more ever: " if questioned about this matter in the future, I will simply refer the questioner back to this release."

Full release:

OMAHA, NE—This press release will be unusual. First, I will write it almost as if it were a letter. Second, it will contain two sets of facts, both about Dave Sokol, Chairman of several Berkshire subsidiaries.

Late in the day on March 28, I received a letter of resignation from Dave, delivered by his assistant. His reasons were as follows:

“As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests. I have no more detailed plan than this because my obligations from Berkshire Hathaway have been my first and only business priority.”

I had not asked for his resignation, and it came as a surprise to me. Twice before, most recently two or so years ago, Dave had talked to me of resigning. In each case he had given me the same reasons that he laid out in his Monday letter.

Both times, I and other Board members persuaded him to stay. Berkshire is far more valuable today because we were successful in those efforts. Dave’s contributions have been extraordinary. At MidAmerican, he and Greg Abel have delivered the best performance of any managers in the public utility field. At NetJets, Dave resurrected an operation that was destined for bankruptcy, absent Berkshire’s deep pockets. He has been of enormous help in the operation of Johns Manville, where he installed new management some years ago and oversaw major change.

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. 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. 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.

Furthermore, he knew he would have no voice in Berkshire’s decision once he suggested the idea; it would be up to me and Charlie Munger, subject to ratification by the Berkshire Board of which Dave is not a member.

As late as January 24, I sent Dave a short note indicating my skepticism about making an offer for Lubrizol and my preference for another substantial acquisition for which MidAmerican had made a bid. Only after Dave reported on the January 25 dinner conversation with James Hambrick did I get interested in the acquisition of Lubrizol.

Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.

He has told me that they were not a factor in his decision to resign.

Dave’s letter was a total surprise to me, despite the two earlier resignation talks. I had spoken with him the previous day about various operating matters and received no hint of his intention to resign. This time, however, I did not attempt to talk him out of his decision and accepted his resignation.

* * *

Effective with Dave’s resignation, Greg Abel, presently President and CEO of MidAmerican Holding Company, will become its Chairman; Todd Raba, President and CEO of Johns Manville, will become its Chairman; and Jordan Hansell, President of NetJets, will become its Chairman and CEO. 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.



And if that fails, Buffett will simply blame it all on Moody's.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Filthy Rotter's picture

So how much did Dave Sokol make from this...anyone done the math?

bigdumbnugly's picture

"Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release. "

 

hehe.  i gotta remember that one.

Monkey Craig's picture

Worked with somebody who had the balls to email the legal department:

"your lack of reply will confirm my opinion" on a transaction.

 

He doesn't work there anymore.

Don Birnam's picture

I sense a no-holds-barred demonstration of unabashed Buffett rump swabbery is about to be let loose by none other than Uncle Warren's official cheering section, CNBC.

Becky ! Don the kneepads ! Put a shine on this tarnished old cad!

Yits and the Yimrum's picture

B-Cups is going to be havin a save Uncle B's reputation bake sale

and the product will contain the usual healthful HFCS and aspartame; so buyer beware

I think I need to buy a gun's picture

its amazing how everyone comes right to buffetts defense......

NOTW777's picture

you wont see a becky quick special on this

Filthy Rotter's picture

Interesting link from March 14th...

http://www.businesswire.com/news/home/20110314006747/en/Robbins-Umeda-LL...

And from the story...

Robbins Umeda LLP, a shareholder rights litigation firm, is investigating possible breaches of fiduciary duty and other violations of state law by members of the board of directors of The Lubrizol Corporation (NYSE: LZ) in connection with their efforts to sell Lubrizol to Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B).

On March 14, 2011, Berkshire Hathaway announced it has entered into a definitive merger agreement to purchase Lubrizol through an all-cash tender offer. If the transaction is completed, Lubrizol shareholders will receive $135 in cash for each share of Lubrizol common stock they hold.

The investigation seeks to determine whether Lubrizol's board of directors undertook a fair process to obtain maximum value for its shareholders. Notably, analysts have set a target price for Lubrizol as high as $148 per share. Furthermore, on February 2, 2011, Lubrizol reported net income for the fourth quarter 2010 that beat Wall Street expectations.

Front running and this from the board of directors?  Fakked up!

TexDenim's picture

This sounds solid to me. I just read all the WSJ comments about this and not a word about Robbins Umeda. It's also clear from the Berkshire Hathaway guide for CEOs that Sokol failed to live up to Buffet's "standards". Let's see what Becky (I love you Warren) Quick has to say to CNBC this AM.

chrisd's picture

There is a press release from some lawfirm every single time there is any acquisition, no matter what. Referring to this as evidence of anything is akin to me saying you are a jerk because your ex-girlfriend / boyfriend saying so.

kubrick007's picture

3 million. if i had to guess he is prob worth several 100s of millions as buffett has talked so highly of him in the past. which begs the question...does anyone think the guy really would bother to go after what is basically pennies to him... 

SparkyvonBellagio's picture

Ol' Front-Running Warren now in a pickle.

Freddie's picture

It is f***ing front running and Buffett saw no problem in it!  Warren is a Obama and Goldman boy.

Translational Lift's picture

How can anyone be surprised by any of this BS.  Just another chosen one, squid alum...........

AN0NYM0US's picture

"I have held back nothing in this statement."

 

 

that's reassuring, do you end all of your correspondence that way?

InconvenientCounterParty's picture

It's in the same category as a press release that POTUS signed a secret order.

Cognitive Dissonance's picture

One of the most bizarre statements from anyone I have ever seen. Part CYA, part setting the record straight, part edging for the door while smiling for the cameras.

Does this mean the world will finally recognize the Oracle for the black vulture he really is or did his fall guy just fall on the sword? I wonder if Buffett will be calling Becky Quick to arrange TV coverage for his world wide "forgive me but I'm just an old fool" tour?

<sigh> A man can dream.

Monkey Craig's picture

I, too, was struck by how strange this was. I thought that maybe so much was running through Buffett's head (Japan tragedy, Lubrizol acquisition, trip to India) that he wanted to put something on paper and then forget about it.

 

Filthy Rotter's picture

"forgive me but I'm just an old fool" tour?

Classic!

Ahhhh...the poor auld fakker...he's just a half-wit.

TruthInSunshine's picture

Is this real?

That Buffet wouldn't endorse this most clever and cunning behavior, I mean...

smlbizman's picture

im with you..i figure this should move him to the front of the class...

Freddie's picture

He loves Goldman and the Kenyan.  Buffett is an evil old man.

sysin3's picture

Some truly are more equal than others.

cossack55's picture

A real oracle would have seen this coming.

long juan silver's picture

r

Or bot at $25 in 2009 thereby frontrunnung the frontrunner.

Horatio Beanblower's picture

Free and fair markets, obviously...

 

(Reuters) - Shares in Bank of Ireland (BKIR.I) and Allied Irish Banks (ALBK.I) will be suspended from trading on Thursday on the Irish stock exchange ahead of the publication of crunch stress tests. - http://www.reuters.com/article/2011/03/30/ireland-banks-shares-idUSWLA682320110330

williambanzai7's picture

Another day in the world that lets Mozillo walk and sends Martha to the Big House. Crony Amerika! Will he be joining the Libyan Foreign Minister in London?

ZackAttack's picture

“As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value"

 

Resigning to spend more time with our money.

Korg's picture

Create enduring equity value eh??

I knew he was buying bullion!!

TruthInSunshine's picture

"If questioned about this matter in the future, I will simply refer the questioner back to this release."

 

Translation = It's good to be the King.


Dr. No's picture

Translation = This release is sooo vetted by lawyers and if i speak about anymore details, I am screwed.

Thomas's picture

I think your supposition is correct. Moreover, I thought it made sense to lay it out and then stuff it deep, all in one letter.

Mr Anderson's picture

ZH Community Bank (ZH CB)

The first full reserve banking institution in America.

The full faith and credit of the United States does not mean what it did one day. The FDIC has to continually go back to the federal government for more money to cover the deposits and savings of the public. This tax upon the people of the united states must end. The ZH bank does not the FDIC because your money is truly safe with us.

Every dollar of deposits you remove from your commercial bank and place with us, $10 of commercial paper is removed from the system. For every dollar of savings or CD's your remove from your commercial bank you remove up to $100 in commercial paper from the system.

How does the system work?

The ZH CB is a 100% online community bank. To transfer your current funds all you need to do is ETB (electronically bank transfer) them into your account. you can set up ETB's for all your monthly bills, your paychecks, even student loans. To pay for your daily purchases you will be issued a debit card linked to your account. There will be no possibility of overdraft so it is advised to keep a credit card in case of emergencies. You will still have the merchant credit processing fees. You will not have a checkbook. If you need cash, it is advised you keep can account open at a commercial bank. ETB the money to your account then use the ATM. Another option is each time you make a small purchase make sure to get cash back. It is always recommended by ZH to have a 6 months of hard cash on hand.

What are the costs?

The bank is non profit running at the most minimal of operating expenses. We expect a yearly fee of under $20 to cover our server maintenance and debit card issuance's and a minimal number of full time employees. If you use an ATM of a commercial bank with your ZH debit card you will likely incur the fees associated with that bank.

Why should I join this bank?

The community bank is 100% transparent. Each day you can log in to see the amount of deposits and withdrawals from the bank. Each employee's salary is posted online. The bank makes no loans so your deposit is fully backed. There is no risk of losing your deposits during a credit or financial crisis. If you feel your commercial bank is going to go under during a deflationary period, safety is is simple as few clicks away. During periods of inflation the purchasing power of your money will lessen to an extent but the bank cannot effect the decisions of the federal reserve in this case. Though you can talk to your friends and advise them invest their savings in the ZH CB in order to lower the M2 money supply, thus reigning in the money printing effect of the federal reserve.

What if I want lend money?

We advise you ask a commercial bank for the loan and pay their resulting interest rates. the ZH CB is meant for people who do not wish to live in debt, who want to protect their assets. ZH CB still advises you to purchase precious metals to hedge against inflation.

What if I want a return on my money?

ZH CB advises you to invest in equities, commodities, treasuries, etc. The bank will still be here when the market is to volatile or you decide to cash out.

Can I transfer my 401 K or mutual funds into the ZH?

ZH is the safest place for your 401K when it comes time to retire. Sudden market changes will not change your retirement plans (like your 40% losses in 2008).

What will happen if many people put their money in ZH CB?

If enough people put their money in the ZH CB at one time it could potentially create a banking crisis for the commercial and investment banks. This will not be your worry if you have already placed your money in the ZH CB. Putting your money in the ZH CB can also be seen as a vote of no confidence in the federal reserve & TBTF banks.

Can I place my business accounts with ZH CB?

Yes you can place your business accounts with us. Municipal and Small governments are welcome as well. If your business needs loaned cash to stay afloat you may be better off keeping your funds with a commercial bank.

 

Tyler and community, thoughts?

ebworthen's picture

 

Nice idea, but it is like the Food Bank that encourages illegal immigrants and keeps prices high at the retail stores.

With TBTF there is no such thing as an honest bank - besides - if you can't run T.V. commercials 24/7 and have iPhone apps and "rewards" programs the Millenials will never know you exist.

You could call it "Linux Bank" but it would not end the hegemony of the "Apple" or "Microsoft" banks.

 

Mr Anderson's picture

I read on here that 1-2 % of people are prepared for any type of governmental collapse. Most people it seems on ZH are. That is quite a base of people to use the bank. Think of the producers of society who are tired of giving all their profits away to the banks. Think of all the Ron Paul supporters during 08 election that want to end the FED. It would be an excellent way to put your money where your mouth is. Not only that but protect it.

MachoMan's picture

I actually have an idea similar to this except with physical cash/PMs...  It can be done for less than seven (7) figures I think...  suitable locations abound...  the biggest problem I see is finding people to let you store their money and getting them to pay you enough to cover the insurance premiums...  you could handle hundreds of billions of dollars for little or no outlay in infrastructure...  take an administrative commish and watch the banking system implode.  Do you want the FDIC's guaranty or the promise of a guy who actually has your shit?  Return of capital not return on capital...

ebworthen's picture

Problem:  limitless supply of taxpayer money for FDIC and FED

Mr Anderson's picture

FDIC goes to Federal Govt for more money. Federal Govt. has to loan that money from somewhere. Currently the FED.

This is insurance, insurance only works if its rarely used and not by everyone.  SHTF and FDIC isn't worth spittle because the Govt won't have the $$ to bail everyone out at up to 250K.

 

MachoMan's picture

I would presume those who are in dollars are well aware of the bernak...  but, if you have the capacity to store large amounts of physical cash...  you also have the capacity to store other...  things of financial interest.

CitizenPete's picture

What's wrong with James Turk's Gold Money?. 

1984's picture

I have to chuckle.  You obviously know shit about how money works. 

The Bernank prints the money.  How does your ZHCB lower M2?  Burn it?

Sad Sufi's picture

Tyler,

I always enjoy your puncturing of the facad of the Kindly Tycoon from Omaha, to reveal the corrupt rotten center inside. This is a great way to remind us that all of the dealers in Wall Street product stink, even the one's who have the reputation of being so smart and beneficent.

augie's picture

if Buffet goes down i dont know what i'll do. First Ms. Cleo now Warren?! who will advise me!?! SOMEBODY TELL ME WHAT TO DO, I CAN'T POSSIBLY BE EXPECTED TO THINK FOR MYSELF!

...the caps is me yelling fyi.

camoes's picture

SUCK IT UP, BICTHEZ!!! COPE WITH IT SAID BUFFET'S MR. MAGOO SIDEKICK

CRASH BERKSHIRE HATHAWAY, SEC MAKE IT AN EXAMPLE!! NO FRONTRUNNING ALLOWED

ziggy59's picture

friggin speed doesnt kill....GREED kills!     so is there insider trading implications being offered or what?

AN0NYM0US's picture

no way, the dude only bought $10m worth of their shares and then told the richest cat on the planet to buy the company