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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.

 

 


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Wed, 03/30/2011 - 17:26 | Link to Comment LostWages
LostWages's picture

Greed Bitchez!

Wed, 03/30/2011 - 18:01 | Link to Comment Filthy Rotter
Filthy Rotter's picture

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

Wed, 03/30/2011 - 18:12 | Link to Comment bigdumbnugly
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.

Wed, 03/30/2011 - 18:16 | Link to Comment Monkey Craig
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.

Wed, 03/30/2011 - 18:17 | Link to Comment Don Birnam
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!

Wed, 03/30/2011 - 23:37 | Link to Comment Yits and the Yimrum
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

Wed, 03/30/2011 - 19:09 | Link to Comment I think I need ...
I think I need to buy a gun's picture

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

Wed, 03/30/2011 - 21:55 | Link to Comment NOTW777
NOTW777's picture

you wont see a becky quick special on this

Wed, 03/30/2011 - 18:27 | Link to Comment Filthy Rotter
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!

Thu, 03/31/2011 - 06:17 | Link to Comment TexDenim
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.

Thu, 03/31/2011 - 09:48 | Link to Comment chrisd
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.

Wed, 03/30/2011 - 21:36 | Link to Comment kubrick007
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... 

Thu, 03/31/2011 - 10:20 | Link to Comment Chuck Walla
Chuck Walla's picture

$3,000,000

Wed, 03/30/2011 - 18:19 | Link to Comment SparkyvonBellagio
SparkyvonBellagio's picture

Ol' Front-Running Warren now in a pickle.

Wed, 03/30/2011 - 22:10 | Link to Comment Freddie
Freddie's picture

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

Thu, 03/31/2011 - 08:04 | Link to Comment Translational Lift
Translational Lift's picture

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

Wed, 03/30/2011 - 17:32 | Link to Comment AN0NYM0US
AN0NYM0US's picture

"I have held back nothing in this statement."

 

 

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

Wed, 03/30/2011 - 17:49 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

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

Wed, 03/30/2011 - 18:01 | Link to Comment Cognitive Dissonance
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.

Wed, 03/30/2011 - 18:12 | Link to Comment Monkey Craig
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.

 

Wed, 03/30/2011 - 18:41 | Link to Comment Filthy Rotter
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.

Wed, 03/30/2011 - 17:29 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Is this real?

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

Wed, 03/30/2011 - 19:02 | Link to Comment smlbizman
smlbizman's picture

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

Wed, 03/30/2011 - 22:15 | Link to Comment Freddie
Freddie's picture

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

Wed, 03/30/2011 - 17:27 | Link to Comment sysin3
sysin3's picture

Some truly are more equal than others.

Wed, 03/30/2011 - 17:27 | Link to Comment cossack55
cossack55's picture

A real oracle would have seen this coming.

Wed, 03/30/2011 - 18:24 | Link to Comment long juan silver
long juan silver's picture

r

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

Wed, 03/30/2011 - 17:28 | Link to Comment Horatio Beanblower
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

Wed, 03/30/2011 - 17:35 | Link to Comment williambanzai7
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?

Wed, 03/30/2011 - 17:33 | Link to Comment ZackAttack
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.

Wed, 03/30/2011 - 17:50 | Link to Comment Korg
Korg's picture

Create enduring equity value eh??

I knew he was buying bullion!!

Wed, 03/30/2011 - 17:34 | Link to Comment TruthInSunshine
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.


Wed, 03/30/2011 - 17:36 | Link to Comment Dr. No
Dr. No's picture

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

Wed, 03/30/2011 - 17:40 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Yes...

...that too.

Wed, 03/30/2011 - 17:44 | Link to Comment Thomas
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.

Wed, 03/30/2011 - 17:37 | Link to Comment Mr Anderson
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?

Wed, 03/30/2011 - 18:10 | Link to Comment ebworthen
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.

 

Thu, 03/31/2011 - 01:08 | Link to Comment Mr Anderson
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.

Wed, 03/30/2011 - 18:19 | Link to Comment MachoMan
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...

Thu, 03/31/2011 - 00:17 | Link to Comment ebworthen
ebworthen's picture

Problem:  limitless supply of taxpayer money for FDIC and FED

Thu, 03/31/2011 - 01:06 | Link to Comment Mr Anderson
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.

 

Thu, 03/31/2011 - 09:42 | Link to Comment MachoMan
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.

Wed, 03/30/2011 - 23:43 | Link to Comment CitizenPete
CitizenPete's picture

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

Thu, 03/31/2011 - 05:15 | Link to Comment 1984
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?

Wed, 03/30/2011 - 17:38 | Link to Comment Sad Sufi
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.

Wed, 03/30/2011 - 17:38 | Link to Comment augie
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.

Wed, 03/30/2011 - 17:39 | Link to Comment camoes
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

Wed, 03/30/2011 - 17:40 | Link to Comment ziggy59
ziggy59's picture

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

Wed, 03/30/2011 - 17:40 | Link to Comment williambanzai7
williambanzai7's picture

Wed, 03/30/2011 - 17:47 | Link to Comment AN0NYM0US
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

Wed, 03/30/2011 - 17:43 | Link to Comment bobola
bobola's picture

cossack55

classic response..!!

Thanks for the laugh..........

Wed, 03/30/2011 - 17:44 | Link to Comment Bruce Krasting
Bruce Krasting's picture

The most stupid fucking thing I have heard in a long time. What an idiot.

Wed, 03/30/2011 - 17:51 | Link to Comment AN0NYM0US
AN0NYM0US's picture

an idiot perhaps, or part of the culture there. He offered to resign on two prior occasions perhaps for similar things.  Maybe Sokol had a conscience, think Gollum

 

consider that the Buffster saw nothing wrong with what he did

 

 

Wed, 03/30/2011 - 22:45 | Link to Comment Freddie
Freddie's picture

So two prior ocassions and this is #3??  Buffett had no problem with him frontrunning 3 times!

 

Wed, 03/30/2011 - 17:45 | Link to Comment EvlTheCat
EvlTheCat's picture

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

 I always love these types of lines from the criminally insane.

CYA

 

Wed, 03/30/2011 - 18:51 | Link to Comment Prof Gulliver
Prof Gulliver's picture

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

Of course, the thought bubble above Warren's head was adding "...because the law does not apply to us."

Wed, 03/30/2011 - 17:48 | Link to Comment bob_dabolina
bob_dabolina's picture

Yea, yea, yea Buffet is full of shit

And don't tell me he made all that money by legitamely trading shares of coke. He's as dirty as the rest of them but has clearly done a better job at getting away with it.

Wed, 03/30/2011 - 17:50 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

which is what matters most.

Wed, 03/30/2011 - 18:27 | Link to Comment Don Birnam
Don Birnam's picture

Avuncular, bespectacled "favorite uncle" my ass. Buffett can game and front-run with the best of them. Buffett's Omaha is probably as clean a seat of a "syndicate," in a financial sense, as Chicago was in the '20s.

Wed, 03/30/2011 - 17:46 | Link to Comment TexDenim
TexDenim's picture

Totally bizarro!

Wed, 03/30/2011 - 17:47 | Link to Comment bania
bania's picture

Dealing with people just causes headaches and grief.

Why Buffett doesn't just buy up enough gold to make a 67ft. cube and stick it in his backyard is beyond me.

Wed, 03/30/2011 - 17:51 | Link to Comment FischerBlack
FischerBlack's picture

If he didn't own stock in the company, Buffet would have asked 'If it's so good, why don't you own any?' Hats off to the dude for getting a better price than Buffett. If anything, it shows Buffett is slipping.

 

 

Wed, 03/30/2011 - 18:01 | Link to Comment Hedgetard55
Hedgetard55's picture

I'm hoping that by the end of the SHTF crisis coming that ol' Warren is reduced to Dumpster diving to eat.

Wed, 03/30/2011 - 18:03 | Link to Comment ebworthen
ebworthen's picture

 

Stalin did not have to answer questions either.

 

Wed, 03/30/2011 - 18:07 | Link to Comment citta vritti
citta vritti's picture

Notwithstanding the Raven of Omaha croaking "never more," what are the odds that where there's smoke ...? and of course by the lights of modern big league playing, nothing's confirmed till it's denied. Can you spell reputation risk? 

Hmmm. $104 limit, versus $135 BH offer, x 96,030 tears, oops shares = 2,976,930 in what, 12 weeks or so. Gotta be chump change for these guys, right? I guess he needed something to pay the Net Jets fees.

I guess we'll have to wait to see how the acquisition works out (years) before there'll be any restive BH shareholders or SEC/DoJ lawyers interested in talking further. 

Wed, 03/30/2011 - 18:13 | Link to Comment buzzsaw99
buzzsaw99's picture

Obviously Dave knows where the berkshire bodies are buried. He will have a fatal accident soon.

Wed, 03/30/2011 - 18:13 | Link to Comment cocoablini
cocoablini's picture

I've sent many a complaint to the SEC about obvious frontrunning, media manipulation to move a stock price etc. They don't care-the whole system is just the Wild West and there is no rule of law."Investing" is a joke and a half-theres nothing to invest in. There's no yield, there are phoney numbers,valuation is totally confused, no price discovery, no enforcement. No wonder its BOTS running the investing now.

So, does anyone think Warren's donkey is gonna go to jail for insider trading??

Wed, 03/30/2011 - 18:20 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Harry M. Markopolos says "no."


Wed, 03/30/2011 - 18:17 | Link to Comment Johnk
Johnk's picture

http://blogs.wsj.com/deals/2011/03/30/warren-buffett-lieutenant-resigns-amid-stock-purchases-read-the-letter/

 

Sokol purchased 96,060 shares at $104 apparently in early January.  LZ is at $134 today, so $30 x 96k = @$2.9 million paper profit.  Doesn't Sokol own 10% or so of MidAmerican, which had $1.2 billion in net earnings in 2010?

Seems like a relatively small amount for someone in Sokol's position.  Still, it is a weird situation. 

Not sure what Warren did wrong here, but I think comparisons to Stalin are slightly hyperbolic.

 

Wed, 03/30/2011 - 19:30 | Link to Comment Lord Welligton
Lord Welligton's picture

Why was Buffet in the dark.

Why did he make the statement.

Is there something else?

No more questions???????????

Wed, 03/30/2011 - 18:24 | Link to Comment fellatio is not...
fellatio is not fattening's picture

As much as I can be skeptical as well, being realistic there is no reason to believe this guy did anything Illegal, the dollars involved just aren't worth the risk.  I saw math that said he made just under $3m, come on, $3b a problem, $3m, just not.  Also, on a slightly different note, all Wall Street does is frontrun, a firm accumulates a position in a stock, than has an analyst put out a "BUY" recommendation, they sell from their inventory because "If they bought from the street it would create order imbalances and move shares to quickly"  Words from a letter I received from the SEC in 1998 when I wrote to complain.

Wed, 03/30/2011 - 18:55 | Link to Comment Jackfish
Jackfish's picture

You don't get it.  There is never enough. 

Any profit is good, any loss is bad. 

Martha Stewart's problems were over a $70K potential loss.  Do you think that $70K pays her lunch bill?

Wed, 03/30/2011 - 21:40 | Link to Comment earnyermoney
earnyermoney's picture

Explain that to Martha Stewart.

Wed, 03/30/2011 - 18:28 | Link to Comment Nevermind
Nevermind's picture

Janis Joplin trade: "freedom is just another word"

Wed, 03/30/2011 - 18:54 | Link to Comment JohnG
JohnG's picture

Winning!

Wed, 03/30/2011 - 18:55 | Link to Comment grunk
grunk's picture

All questions will be referred to Becky Quick. 

Wed, 03/30/2011 - 18:55 | Link to Comment duncecap rack
duncecap rack's picture

Can somebody explain the problem with Buffets behaviour to me? I really don't have a good grasp of these things because I have never been on the inside so to speak The way I read this is that this guy bought a bunch of shares prior to taking the proposal to Buffet. When Buffet followed up on the advice and made a move on the stock sokol made a big profit fast. I would kind of think you would want to be rid of a guy who did that sort of thing. Is it common to let people frontrun the company? Would this be permitted or encouraged at other places? What Sokol did seems kind of wrong tome.

Wed, 03/30/2011 - 20:01 | Link to Comment fellatio is not...
fellatio is not fattening's picture

Apparently he did tell WB he bought some shares and he seemed to get the reply from WB that Berkshire had no interest in buying any shares of Luberizol, if that's all correct than the only thing I see as stupid but not illegal was continue to push the take-over with Lube's CEO after buying ~100k more shares, that's not wise but not illegal.

Wed, 03/30/2011 - 21:18 | Link to Comment jkruffin
jkruffin's picture

Do you really believe that Buffet didn't know this guy had all those shares? I bet some of them were Buffet's, or someone had some stashed away for him under a different name.

Wed, 03/30/2011 - 23:20 | Link to Comment Yits and the Yimrum
Yits and the Yimrum's picture

'big hands, you're the One!"

Wed, 03/30/2011 - 19:10 | Link to Comment Lord Welligton
Lord Welligton's picture

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

Or.

"Message to all lawyers. Get me as far away from this shit as you can. You will be rewarded."

Front running?

Is there not another expression?

Insider trading?

Of course I could be wrong. I'm not a lawyer and my command of English is questionable.

 

Wed, 03/30/2011 - 19:17 | Link to Comment agrotera
agrotera's picture

Buffet is making a fool of himself, and there is no excuse for the insider....it is all despicable. 

The (he insists that this statement says it all) statement in his release are enough to show illegal activity regardless of his commentary about lawfulness...this is very pathetic of him.

 

Wed, 03/30/2011 - 19:20 | Link to Comment notadouche
notadouche's picture

The "douchebag of Omaha"  The "shylock of Omaha"  The "frontrunner of Omaha"  Whatever dude.  You're rich.  You don't have to answer questions.  End of story.

Wed, 03/30/2011 - 19:29 | Link to Comment ElixirMixer
ElixirMixer's picture

If I were a shareholder of Berkshire Hathaway, I would be calling my lawyer right now.

Wed, 03/30/2011 - 20:02 | Link to Comment fellatio is not...
fellatio is not fattening's picture

ElixirMixer...please tell me what your conversation with the lawyer would be about?  You got less as a shareholder because the other guy got $3m, that MAY work out to 25 cents a share...hope the lawyer works cheap

Wed, 03/30/2011 - 19:33 | Link to Comment ThisIsBob
ThisIsBob's picture

Looks very insiderish to me.  Insider guy knows that a deal is going to be pitched, so he buys some stock in advance of the pitch.

Doesn't matter that he was the pitcher, his trade was made on material non public info.

I also have every confidence that the broker who was working the order for him didn't whisper a thing to anybody, anywhere either.

 

Wed, 03/30/2011 - 21:00 | Link to Comment Anonymouse
Anonymouse's picture

By CFA standards at least, he was wrong even if it was legal.  He owes his duty to his employer.  Buffet should get a crack at investing before he buys any for his personal account.  Of course, if he is not a CFA, it doesn't apply.  If he is, he should lose his charter

Wed, 03/30/2011 - 20:52 | Link to Comment kornholio
kornholio's picture

buffet is an old cornholing hypocrit....bailed out by the gubbermint and then sent them a thank you letter...dear gubbermint thank you all for bailin me and my criminal cocksucking bankster friends out again...yours truly warren quick...

Wed, 03/30/2011 - 21:16 | Link to Comment jkruffin
jkruffin's picture

So, Buffet just admitted publicly that he was an accomplice to insider trading fraud, yet I don't see anyone knocking on his door with the handcuffs.  Being a billionaire at the expense of the people, doesn't make you immune from the laws.

Wed, 03/30/2011 - 21:23 | Link to Comment buzzsaw99
buzzsaw99's picture

I admire Dave. That old codger deserves a fleecing more than anyone.

Wed, 03/30/2011 - 21:31 | Link to Comment mkkby
mkkby's picture

I didn't do anything wrong, but I'm resigning from a plum job that everyone in the world wants.  Hilarity ensues.

Wed, 03/30/2011 - 22:35 | Link to Comment ATG
ATG's picture

Exercise in saving face for all?

The killer whale in the boardroom may be Bust Your Dream, down -65% with a target of zero:

"If the investment does ultimately sour, though, it would be a black mark for the executive who spearheaded it: David Sokol, chairman of Berkshire units MidAmerican and NetJets."

http://www.reuters.com/assets/print?aid=USTRE72848X20110309

http://stockcharts.com/freecharts/gallery.html?BYDDY

http://www.businessweek.com/news/2011-03-30/text-of-warren-buffett-s-let...

Wed, 03/30/2011 - 22:35 | Link to Comment vxpatel
vxpatel's picture

"Shortly before I left for Asia on March 19, I learned that Dave first purchased ..."

Dave forgot to pay off someone in the organization and they decided to get him back...that's all that happened here...

How else would warren 'learn' about dave's behavior...?

Wed, 03/30/2011 - 23:40 | Link to Comment chairsatan
chairsatan's picture

This is barely even scandalous.  If that's all he did, he should be annointed a saint of Wall Street and there should be an annual parade in his honor. 

Wed, 03/30/2011 - 23:50 | Link to Comment CitizenPete
CitizenPete's picture

Via la Franzzz!

 

 

The International Monetary Fund should get the power to police rules envisioned to promote currency-market stability, French President Nicolas Sarkozy told Group of 20 finance chiefs in Nanjing, China.

“Greater supervision by the IMF” of nations’ balance of payments and reserves “appears indispensible,” Sarkozy said today in remarks prepared for a one-day seminar that he initiated. “France supports modifying the IMF’s status to expand its oversight capacity.”

SDRs with Rice and Brown Sauce:

 Chinese President Hu Jintao told Sarkozy yesterday in Beijing that China views the internationalization of the yuan as inevitable, with only the pace of the move in question, the French official said.

Sarkozy Backs IMF as Currency Enforcer at G-20 China Opening

http://www.bloomberg.com/news/2011-03-31/sarkozy-backs-imf-as-currency-e...

 

The IMF Govenor of the United States (Timmah) will be pleased?.

Thu, 03/31/2011 - 02:15 | Link to Comment Problem Is
Problem Is's picture

Things not on the up and up in Munger-Corn-Pone Country?

Imagine that.

Better stick to sucking off of the Government TBTF teat, Uncle "Welfare Ho" Warren...

Thu, 03/31/2011 - 05:05 | Link to Comment Charlie_Day
Charlie_Day's picture

Why wouldn't you keep a guy that puts his money where his mouth is? If the guy is finding a business worth investing his own money in, then turns you on to that same business.... umm yea that's what I look for in an investment adviser.

Thu, 03/31/2011 - 05:22 | Link to Comment Coldfire
Coldfire's picture

Meanwhile, at the Department of "Justice:

<<the sound of crickets>>

Thu, 03/31/2011 - 07:33 | Link to Comment TexDenim
TexDenim's picture

This is from the Big Picture blog. Makes a lot of sense to me, and no one else has mentioned this strategy. Very smart:

 

Better advice: Transfer your purchase to Berkshire on announcement of acquisition.  The personal buys should be deemed “on the company’s behalf,” and you agree to transfer the shares to BRK. Perhaps they throw you a nice bonus for your troubles.

Thu, 03/31/2011 - 09:38 | Link to Comment Mercury
Mercury's picture

If you were a secretary at a place like Fidelity and you tried to pull this shit, you'd be beaten senseless and thrown in a dumpster before lunch.

But hey...this should be cool because in his resignation letter he states that:

...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.

You wouldn't want to prevent the guy from realizing his goal would you?  You might as well take away people's zero equity interest homes from them and crush their dreams, their American dreams.

Thu, 03/31/2011 - 11:41 | Link to Comment Stephen
Stephen's picture

Sokol's action may not be illegal but I think they fail Buffet's newspaper test for ethics.

"“…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.” WEB

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