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Forget David Sokol, Is The SEC About To Tell Charlie Munger To "Suck It In"?

Tyler Durden's picture


On March 31st, David Sokol appeared on CNBC Squawk Box (to the most distraught Becky Quick we have ever seen) in an attempt to explain why his purchase of of Lubrizol Corp, prior to Berkshire Hathaway's purchase of the Company, was perfectly acceptable. In attempting to provide evidence of this“perfectly acceptable” practice David Sokol said a curious thing (17 minutes 15 seconds in):

I don’t believe I did anything wrong. Charlie Munger owned 3% of BYD before he asked me to go look at it.

Because we all know if everyone is doing it, then it isn't illegal or unethical. Especially if everyone is a member of the Berkshire inner circle. But if the SEC as is now widely reported, is about to make a public spectacle out of David Sokol (if not actually press civil charges because, well, the SEC doesn't actually pursue large scale securities fraud), shouldn't they be looking at ole' Charlie "Suck It In" Munger?

The Prestory

In September of 2008 MidAmerican Energy (a company controlled by Berkshire), bought 225 million shares of BYD (10%) at a cost of $230 million. On February 27, 2010, according to the WSJ, Buffet valued this stake at $1.99B. Since that time the stock has fallen about 60% and we would roughly value MidAmerica’s stake at $852M. A nice 370% gain since the initial purchase. Which means that Munger's 3% is now worth about $280m. This 3% stake in BYD makes up about a little less than 30% of Munger's $1 Billion total net worth . A not inconsequential sum, and significantly more valuable that the $13m stake Sokol had in Lubrizol.

Charlie Munger dispatched then loyal Berkshire lieutenant David Sokol to do the due diligence on BYD. But make no mistake, the purchase of MidAmerica’s stake in BYD was initiated by, and subsequently endorsed by, if not executed by, one Charlie Munger.

From Fortune:

Buffett, who is 78, was intrigued by Munger's description of the entrepreneur behind BYD, a man named Wang Chuan-Fu, whom he had met through a mutual friend. "This guy," Munger tells Fortune, "is a combination of Thomas Edison and Jack Welch - something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it."

Coming from Munger, that meant a lot. Munger, the 85-year-old vice chairman of Berkshire Hathaway, is a curmudgeon who frowns on most investment ideas. "When I call Charlie with an idea," Buffett tells me, "and he says, 'That is really a dumb idea,' that means we should put 100% of our net worth into it. If he says, 'That is the dumbest thing I've ever heard,' then you should put 50% of your net worth into it. Only if he says, 'I'm going to have you committed,' does it mean he really doesn't like the idea."

This time Buffett asked another trusted partner, David Sokol, chairman of a Berkshire-owned utility company called MidAmerican Energy, to travel to China and take a closer look at BYD.

Since 2008 there are many instances of Munger and Buffet talking up BYD. But there is no reference, no disclosure, no evidence that Munger has a personal 3% stake in the company that at times was worth close to $1 billion dollars.

Once Again, For The Cheap Qwest Center Seats

Imagine that Gary Cohn (COO of Goldman Sachs) took a 3% stake in a public company without public disclosure. Then imagine that Cohn tells Blankfein that GS Asset Management should take a 10% stake in this Company. Almost 3 years after GS Asset Management takes a stake in this company it has quadrupled in value. Then, through a slip of a tongue, it comes to be known that cuddly Cohn (who may or may not have commited perjury recently, but that is a completely irrelevant topic for another regulator to ignore) has a previously undisclosed stake currently valued at $280m in this Company. What do you think would happen to Gary Cohn?

The Frontrunning Really Tied The Money Pool Together

Perhaps Munger like Sokol makes frontrunning purchases for his family trust. Perhaps, buying for one's family is a defense to frontrunning. Or perhaps the inner circle at Berkshire Hathaway is NOT subject to the same ethical and or judicial standards that the rest of Wall Street and the investing public are subjected to. Who are we to say that the SEC or DOJ should be asking these questions. After all Berkshire Hathaway is living breathing evidence of American ExceptionalismTM. Warren Buffet and Charlie Munger are examples of all that is good in America.

Who are we to doubt the wisdom of perception.

We have yet to hear from Charlie Munger or Warren Buffet on this matter. We won't.

h/t Lizzie363


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Sun, 04/03/2011 - 22:29 | 1131111 jkruffin
jkruffin's picture

The porn site bill must be bigger this month at the SEC. Those live private shows start costing more and more right?  Bet everyone right now, absolutely nothing happens here....

Sun, 04/03/2011 - 22:45 | 1131149 Ahmeexnal
Ahmeexnal's picture

Munger has no option now but to open his piehole and start spewing out dirty deals by Soros.

Mon, 04/04/2011 - 07:12 | 1131633 BigDuke6
BigDuke6's picture

Buffett's tacit approval of this criminality confirms him as a total and utter douchbag, in case anyone thought otherwise.

Mon, 04/04/2011 - 09:04 | 1131862 Thomas
Thomas's picture

It's Douchebag and, when referring to Buffett, it should always be capitalized.

Sun, 04/03/2011 - 23:10 | 1131216 DoChenRollingBearing
DoChenRollingBearing's picture

NOTHING will happen to the rich members on Team Obama.

Mon, 04/04/2011 - 00:52 | 1131419 anonnn
anonnn's picture

  Privilege is the trump card.

Sun, 04/03/2011 - 23:16 | 1131233 vas deferens
vas deferens's picture

Don't worry the SEC bill for porn is nothing compaired to the Pentagon's!! Do you know how much they are charging for Child Porn these days?

Operation Flicker


Sun, 04/03/2011 - 22:31 | 1131114 SolidSnake961
SolidSnake961's picture

noone can frontrun like goldman but the old farts are trying

Sun, 04/03/2011 - 22:46 | 1131120 EvlTheCat
EvlTheCat's picture

Come on, everyone, let's Wang Chuan-Fu Tonight

Finally, he [Brutus] spoke to Volumnius himself in Greek, reminding him of their student life, and begged him to grasp his sword with him and help him drive home the blow. And when Volumnius refused, and the rest likewise ... grasping with both hands the hilt of his naked sword, he fell upon it and died.!

Sun, 04/03/2011 - 22:37 | 1131121 ss123
ss123's picture

I'm going to start a conspiracy here and make a prediction: Sokol will attempt to take down as many as possible if he gets thrown under the bus here.

And one more thing: Charlie can suck it. Will never forget that comment he made telling the public to suck it in while his ass was getting bailed out.

Sun, 04/03/2011 - 22:39 | 1131137 NidStyles
NidStyles's picture

That's a given. Unless someone pay's his family a visit, which is equally likely.

Mon, 04/04/2011 - 01:05 | 1131442 Rick64
Rick64's picture

 Its surprising to me that Sokol would implicate Munger in public unless things weren't as rosy as they are portrayed.

Sun, 04/03/2011 - 22:39 | 1131134 NidStyles
NidStyles's picture

I thought his reasoning for quitting were quite telling. His made his money, and got out. I bet you find out that he has a home out in the boonies somewhere where he has stockpiled food water and ammo.

Sun, 04/03/2011 - 22:40 | 1131138 SparkyvonBellagio
SparkyvonBellagio's picture


Sun, 04/03/2011 - 22:40 | 1131140 nah
nah's picture

Jesus: "give a man a fish"

Sun, 04/03/2011 - 22:43 | 1131150 HoofHearted
HoofHearted's picture

Martha Stewart's ass would be so deep in jail about now...if she were Charlie Munger.

Sun, 04/03/2011 - 22:46 | 1131152 Cursive
Cursive's picture

Munger should have made his 3% stake in BDY known (i.e. public) earlier.  I doubt this goes anywhere, though.

Sun, 04/03/2011 - 22:44 | 1131153 Oh regional Indian
Oh regional Indian's picture

Meanwhile, I've discovered that chain mail forwarding is a great way to change th epublic mind-set about the criminal over-class. I got a mail forward yesterday with a cloyingly sweet powerpoint about the orifice of omaha and his simple ways and his newspaper delivery start and his love for the world..... it made me sick. I'm sure a million or more have seen it (thsi mail trail alone had a few thousand adresssees). 

Very clever I thought. Sneaky, jest like them rich folk.

We live under three sets of rules. One for the over class (no rules), one for the middle class (mountain of rules) and one for the under-class (no rules but just restrict the damage to yourself and your own).

The social pyramid.


Mon, 04/04/2011 - 00:08 | 1131356 NrYC
NrYC's picture

The prison population in the US is over 2 million.

Mon, 04/04/2011 - 06:22 | 1131612 CunningLinguist
CunningLinguist's picture

The prison population may be over 2 million, but I'll bet you can count the amount of rich fat cats there on one hand. The only reason Bernie Madoff is in prison, is because he made the mistake of swindling some of the wrong people (Elites).

Mon, 04/04/2011 - 01:48 | 1131487 Conrad Murray
Conrad Murray's picture

Wouldn't be too expensive for a few people to get money together to rent the services of someone with a...distributed network of...emailers. Could spread any message far and wide.

Mon, 04/04/2011 - 04:24 | 1131568 Oh regional Indian
Oh regional Indian's picture

My thoughts exactly CM. And retirees and young folk are the biggest chain mail forwarders/readers and gullible to boot.


Sun, 04/03/2011 - 22:45 | 1131156 Ted K
Ted K's picture

SEC rule #1: Make the appearance of doing something about securities fraud.

SEC rule #2: Don't actually enforce securities fraud.

SEC rule #3: If the common natives begin to notice the facade/charade of rule #1, go after some short-sellers who expose SEC incompetence and jerk at their testicles. 

SEC rule #4: If rules #1--3 don't work, shrug your shoulders and go watch some internet porn.

Sun, 04/03/2011 - 22:56 | 1131184 tickhound
tickhound's picture

Addendum to SEC rule #1...


SEC rule #1: Make the appearance of doing something about securities fraud, Monday through Friday, between the hours of 9 am and 5 pm, observing all federal holidays and mandatory vacation time.

Sun, 04/03/2011 - 23:40 | 1131296 EvlTheCat
EvlTheCat's picture

Addendum to Addendum to SEC rule #1:

SEC rule #1 part C:  If inclement weather is affecting any part of the U.S. during the execution of SEC rule #1 then treat the current day as outlined in SEC rule #1 part B as observing a federal holiday.

Mon, 04/04/2011 - 03:25 | 1131540 No More Bubbles
No More Bubbles's picture

Fuck the SEC!  When do we start lynching these rich crooks?

Sun, 04/03/2011 - 22:46 | 1131159 The Rogue Trader
The Rogue Trader's picture

Disgusting double standard....these guys need to study history...Marie Antoinette thought she was entitled to a double standard too Warren, Charlie....hello?

Sun, 04/03/2011 - 22:58 | 1131187 traderjoe
traderjoe's picture

I'm sorry I already trademarked the phrase American Exceptionalism.


Sun, 04/03/2011 - 23:02 | 1131200 Atomizer
Atomizer's picture

Watch out grandpa, there going to take your choo choo trains away.

Sun, 04/03/2011 - 23:05 | 1131207 Itsalie
Itsalie's picture

Sucking it up, like Charlie, Bernank and his masters recommend. I am sure he enjoys reading such stories; and yes, the SEC will ask all their staff to continue watching porn this week and thereafter:

Sun, 04/03/2011 - 23:08 | 1131209 vas deferens
vas deferens's picture

This is the same fat slob that said owning gold was anti-American.  I guess insider trading and a bucket of KFC extra crispy is the American dream now.

Sun, 04/03/2011 - 23:12 | 1131226 Raymond K Hassel
Raymond K Hassel's picture

The day the SEC tells Charlie to suck it is the day after internet porn goes dead.

Sun, 04/03/2011 - 23:22 | 1131254 6 String
6 String's picture

This is a rounding error report that will disappear faster than one can read it....but, hey, it's still worth reporting. After all, when you spin yourself as all-American Apple Pie for 50 years while fleecing the middle class of almost everything in your last days to keep them subservant to your all powerful self and maitaining your legacy at any expense becomes the new rule #1 and rule #2 is don't forget rule #1 of mainting status-quo of legacy survivalship then anything at that point goes. Especially after 50+ years.

The funny thing is all Berkshire board members and executives seem to have fogotten the basics of the other rule: Don't do anything you wouldn't want written about on the front page of the newspaper. Of course, I guess the old saggy balls have come to the conclusion that its okay so long as it only makes the the back page news and when any wrong doing gets weeded out for for it is they can always just resort to their strawman argument:

Suck it up.

Well, indeed, they can suck it up since they are losing every ounce of integrity they may have had at one point. What losers.

Sun, 04/03/2011 - 23:32 | 1131262 palmereldritch
palmereldritch's picture

Blue Horseshoe loathes Anacott Steel

Sun, 04/03/2011 - 23:36 | 1131279 tmosley
tmosley's picture

Damn, yet another guy with a fitting name.

Sun, 04/03/2011 - 23:37 | 1131289 truont
truont's picture

I don’t believe I did anything wrong. Charlie Munger owned 3% of BYD before he asked me to go look at it.

David Sokol:  If I go down, I'm taking you with me, Charlie...

Mon, 04/04/2011 - 00:08 | 1131353 Careless Whisper
Careless Whisper's picture

Don't fuck with me fellas, this ain't my first time at the rodeo.



Sun, 04/03/2011 - 23:41 | 1131293 SparkyvonBellagio
SparkyvonBellagio's picture

They should have a duel.


Pistols ready.



Sun, 04/03/2011 - 23:49 | 1131317 williambanzai7
williambanzai7's picture


He gets appointed to be Obama's Capital Markets Czar and is asked to be a judge on America You've Got Swindling Talent

Sun, 04/03/2011 - 23:56 | 1131323 bankonzhongguo
bankonzhongguo's picture

What an embarrassment to wear a federal badge these days.

With the likes of Shapiro, Napolitano, Holder, Geithner and The Bernak presiding over a howling wilderness of wanton financial crimes, how could any federal agent honestly wake up in the morning knowing that they are making a difference?  Well there is always Headquarters, if you can avoid setting yourself on fire in your backyard.

What's that line from Apocalypse Now?  '... like handing out speeding tickets at the Indy 500 ...'

How about being the shit-house towel boy fluffer at the end of a 100 man gang bang.

Ask them if they want a mint.  Maybe you will get a tip.  Doing security for that Lady Gaga after 20 years of CQB.

These money worshiping creep fucks and their purchased AUSAs are laughing at you while they work to take YOUR very pensions away and otherwise suck the future from your children like a ghoul fellates the head of a broken femur.  All under your watch.

Fidelity, Bravery, ...? Hanssen?

2 years to build a case in a HFT environment?  Only to have the prosecutor shelve it because they go to the same temple as your collar?

Time for a Star Chamber.

If anyone still remembers how to catch a real crook anymore.


Mon, 04/04/2011 - 00:07 | 1131351 palmereldritch
palmereldritch's picture

Well, you see, Willard, in this war, things get confused out there. Power, ideals, the old morality, and practical military necessity. But out there with these natives, it must be a temptation to be God. Because there's a conflict in every human heart, between the rational and irrational, between good and evil. And good does not always triumph. Sometimes, the dark side overcomes what Lincoln called the better angels of our nature.

Apocalypse Dow

Mon, 04/04/2011 - 00:35 | 1131401 Coldfire
Coldfire's picture

[A] function of the Court of Star Chamber was to act like a court of equity, which could impose punishment for actions which were deemed to be morally reprehensible, but not in violation of the letter of the law. This gave the Star Chamber great flexibility as it could punish offenders for any action which the court felt should be illegal even when in fact it was technically legal; however it also meant that the justice imposed by the Star Chamber could be very arbitrary and subjective, and allowed the court to be used later on in its history as an instrument of oppression rather than for the purpose of justice for which it was intended. Many crimes which are now commonly prosecuted such as attempt, conspiracy, libel and perjury were originally developed by the Court of Star Chamber, along with its more common role of dealing with riots and sedition.

Well, if you want to make an omelet, you have to break a few eggs.

Sun, 04/03/2011 - 23:53 | 1131329 Lothar the Rott...
Lothar the Rottweiler's picture

The funny thing is, as corrupt and dirty as they are, the folks they buy out are absolutely ENTHRALLED and worship Ole Warren and BRK.

Personal experience here, folks.  Come and get me, you losers who suck at the craven man's teats after you made your fortunes.

Sun, 04/03/2011 - 23:59 | 1131335 IrrationalMan
IrrationalMan's picture

we all know this is a non event.  if they bring charges, then he will just have some sort deal where he doesn't go to jail because of his advanced age. 

Sun, 04/03/2011 - 23:59 | 1131340 MiguelitoRaton
MiguelitoRaton's picture

Sorry Charlie, front-running's for inmates.

Mon, 04/04/2011 - 00:23 | 1131385 davepowers
davepowers's picture

Becky Quick was distraught

did she bet on the wrong horse?

and, man, they gave that guy a lot of air time


Mon, 04/04/2011 - 05:08 | 1131582 ss123
ss123's picture

Yes... it's as if Sokol was Buffet.

Mon, 04/04/2011 - 00:27 | 1131397 Caviar Emptor
Caviar Emptor's picture

Simply put, we have ourselves a two-tiered system of justice. Just like the old aristocratic social systems that Americans fought a revolution to get out from under. It's good to be back. That whole social mobility crap only caused headaches. Everyone should know his place

Mon, 04/04/2011 - 00:43 | 1131410 Coldfire
Coldfire's picture

If that Mary Schapiro dude's SEC were anything more than a paper tiger, Munger and Sokol would soon be buckling down to learn new skills such as salad tossing and wet nursing.

Mon, 04/04/2011 - 01:06 | 1131443 Jason Bourne
Jason Bourne's picture

When the collapse comes - and it will - may it come in such as a way that it's clear even to the masses who was really responsible.

Hmmm Zerohedge ought to print a deck of playing cards - Banzai can do the art :)

Mon, 04/04/2011 - 04:55 | 1131579 Judge Holden
Judge Holden's picture

may it come in such as a way that it's clear even to the masses who was really responsible.


My absolute, hands-down, #1 fear... that the collapse will come, and all that anger will be directed at... the Latinos!  The gays!  The Muslims!  The Jews!  The (insert vulnerable minority here)! 


Never underestimate the potential for the human mind to think irrationally, especially in dire economic situations.  While it is true that the collapse could be an opportunity to build a capitalist society based upon the rule of law, it is not a foregone conclusion that the anger will be aimed at the responsible parties.


For anyone who thinks there's no way that could happen in America, watch this:

Mon, 04/04/2011 - 01:09 | 1131447 The Axe
The Axe's picture

Oh.....running joke of fraud.    

Mon, 04/04/2011 - 01:31 | 1131465 SparkyvonBellagio
SparkyvonBellagio's picture

Old guy teabagging Old Balls. Fitting end.



Mon, 04/04/2011 - 06:06 | 1131606 AmCockerSpaniel
AmCockerSpaniel's picture

I resemble that remark.

Mon, 04/04/2011 - 03:24 | 1131538 steveo
steveo's picture

I was just thinking, Tyler Durden spends alot of time bringing us valuable information and a venue to discuss ideas.

I visited a few sponsors and bought Tyler a cup of coffee, if 1000 people did that, he would be pretty zipped up.  Each click is about $1 or so.  It is pretty easy, how much do you appreciate the ZeroHedge?

Mon, 04/04/2011 - 07:51 | 1131696 Twindrives
Twindrives's picture

I contributed $100 to Zerohedge last month.  That works too.  Appreciate Zerohedge bringing us the truth.  Keep up the excellent work ladies and gentlemen.    

Mon, 04/04/2011 - 05:33 | 1131588 chalcedonite
chalcedonite's picture

We need to outlaw long term, any stay more than a few days, prisons.  They are part of the problem not the solution.

Mon, 04/04/2011 - 06:03 | 1131605 AmCockerSpaniel
AmCockerSpaniel's picture

We need to take notes here. If we can't beat them.......Join them. After all; It's the one percent at the top, that's winning (WB).

Mon, 04/04/2011 - 06:10 | 1131608 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Charlie Munger is......

Mon, 04/04/2011 - 06:18 | 1131611 ShouldveLeftHer
ShouldveLeftHer's picture

Youll never be in the one percent if youre trolling here looking for tips and other peoples advice and plans to make your own. Nothing has changed from the day 99% of us have started on this forum. Buy the PM dips, dont fucking waste time on equities. I even have some other things we can all start doing that will benefit us all greatly! Plant some crops, learn a trade, and dont be such a drain on society. Productivity wasnt a product we exported untill everyone wanted to wear suits and drive Ferarris and get paid for gambling other peoples money on imaginary games created by computer programs. Fucking dweebs. Produce something!!!!

Mon, 04/04/2011 - 07:40 | 1131673 Waterfallsparkles
Waterfallsparkles's picture

I wonder if Jim Cramer of CNBC and his Action Alerts news letter is legal.  Where he tells everyone what he his going to recommend on his program, so they have an opportunity to front run his "upgrades" and "downgrades".  I know he says that he may have disseminated the information prior to the show but does that disclaimer excuse him of allowing "some people" to front run his calls.  I also wonder if he even front runs his own newsletter.

Why is this different from an Analysis telling some Hedge funds ahead of their upgrades or downgrades.  Especially when Jim Cramer acts like an Analysis and tells why he likes or dislikes a stock and gives a price target.

Mon, 04/04/2011 - 08:09 | 1131727 israhole
israhole's picture

Very interesting article, thanks for posting.

"Because we all know if everyone is doing it, then it isn't illegal or unethical."  So true it makes me want to puke.

Mon, 04/04/2011 - 08:20 | 1131743 Welfareisfraud
Welfareisfraud's picture

Insider trading is still a non-crime. These bastards have it coming though.

Mon, 04/04/2011 - 08:25 | 1131753 ZackAttack
ZackAttack's picture

One can only dream... of a world where Munger is sent to an ass-pounding federal prison, has his teeth knocked out with a ball-peen hammer so he can be used for sex, then sits in his cell crying over the stewed prunes.

Mon, 04/04/2011 - 08:56 | 1131835 HEHEHE
HEHEHE's picture

I think Warren Buffet said it best:

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

So apparently front running acquisitions is standard operating procedure at Berkshire so long as Warren, Dave or Charlie feel it is isn't unlawful.  I guess if you want a high paying desk job where you get paid to do nothing it would be in the Berkshire compliance/legal department.  You don't have to worry about being consulted unless the braintrust feels there might be something wrong.

Mon, 04/04/2011 - 09:19 | 1131950 slaughterer
slaughterer's picture

Charlie has one foot in the grave, do you think he cares?

Mon, 04/04/2011 - 09:20 | 1131946 colonial
colonial's picture

Buffet is Potter. 

Becky quick, is anything but. 

A plague on all their houses

Mon, 04/04/2011 - 11:15 | 1132423 zKeyserSoze
zKeyserSoze's picture
Warren Buffett, Media Master - CNBC Pisani  notice same day HSY and WMT announced price inceases. Buffet suckin uo to Hank Paulsen is more revolting
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