Summarizing David Sokol's Lubrizol Transaction

Tyler Durden's picture

For all those still confused about the David Sokol thought process on Lubrizol, Keith McCullough from HedgeEye summarizes it best:

  1. Buy it in my PA
  2. Pitch Buffett
  3. Meet w/ the CEO
  4. Pitch Buffett again
  5. Buffett buys it
  6. Profit

Any residual questions remaining: please refer to Buffett's later on the matter, as Berkshire will not answer anything else, or to anyone.

PS: great comment from a reader:

What people are missing is in plain sight:  Sokol bought the stock with a "free option" not available to the public.  If WB bit and bid for LZ, Sokol wins big (whether the likelihood was 5% or 50% does not matter), but if WB did not bite and passed, then Sokol would have non-public information that BRK would NOT be interested in LZ.  In the latter hypothetical, any sale of LZ shares would then be an insider trade.  A win/win situation for Sokol - last I checked, those are not available to the public.


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bob_dabolina's picture

I thought this was funny:

I would like to announce now that I will be blackout drunk on Friday night when I may commit crimes that involve a suit case full of cocaine, Dairy Queen and a slam piece I pick up from Taco Bell near Penn Station. Please be advised that I will not be in any control whatsoever and if I harm someone, it has nothing to do with them.

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.

Dolar in a vortex's picture

Maybe Becky Quick will read that on CNBC? I bet her buddy Warren would LOL.

bob_dabolina's picture


Becky Quick announced succesor to Warren Buffet.

wisefool's picture

Maybe, but doesn't FBN,CNN and Bloomberg also have a reporter attached to the Buffet press corps? I think it is Liz Clayman or Peter Barnes on fox business and I don't know who from bloomberg or CNN.

They should do a thunderdome to decide.

Richard Weed's picture

Sokol was chairman of Berkshire’s MidAmerican Energy Holdings and its roofing unit Johns Manville. He was also CEO of NetJets Inc., Berkshire’s luxury-flight subsidiary.

Sokol bought 96,060 Lubrizol shares on Jan. 5, 6 and 7, Buffett said. Berkshire agreed to buy the firm for $9 billion on March 14. The stock purchases may have given Sokol a profit of about $3 million, according to Buffett’s disclosure and data compiled by Bloomberg.

Sokol’s compensation from MidAmerican totaled $59.5 million in the last five years, according to the unit’s SEC filings.

Illegal to have purchased Lubrizol...?  under the present rules, no... unethical... yes.

Alot better had Sokol been an unaffiliated advisor to Berkshire.

The way this was done... makes the whole system smell...

Richard Weed's picture


“There likely will be an investigation,” said Jacob Frenkel, an attorney at Shulman Rogers Gandal Pordy & Ecker in Potomac, Maryland, and a former SEC lawyer specializing in fraud and stock manipulation cases. “If all we have here are purchases before making a recommendation, and the decision to pursue an acquisition doesn’t commence until after the transactions are completed, that wouldn’t satisfy the definition of insider trading.”

Don Birnam's picture

CNBC continues to run the in-flight clip of Quickie on Buffett's private Gulfstream; legs demurely crossed...for modesty, of course. After all, the bloke just struck eighty..."in olden days a glimpse of stocking, was looked upon as something shocking" and all that. But, these are certainly not olden days anymore, are they ?

A somewhat poor choice of video, considering the penchant certain CNBC "ladies" have for private corporate aircraft -- Ms. Maria "Mile High Club" Bartiromo's ride(s) on a Citi corporate jet ( did Jonathan [ son of Saul ] Steinberg ever issue a press release/murmur to the Times regarding these ill-advised junkets ? ) immediately comes to mind.


Cognitive Dissonance's picture

I was not surprised to find Sokol on CNBC this morning for an extensive interview without interruption, at least for the initial spin session. CNBC continues to be the official media lapdog for Uncle Warren and Berkshire.

Don Birnam's picture

Nor was I. This network, above all others, embraces a curious advocacy for all things Berkshire. It is little wonder that they offered the opening slot, as a dutiful apologist would, to Berkshire's erstwhile front-runner Sokol.

The Rebecca Quick element is also curious in and of itself. The woman is so obviously fawning, and makes little effort to conceal it. One has to wonder if the entire CNBC/Buffett relationship/access is, essentially, based solely upon the personal rapport Quick and WEB have for one another; in that, for example, if Quick were to jump ship one day to Fox, would Buffett follow, with his "exclusive access ?" I say, yes.

Occams Aftershave's picture

offered the opening slut? .... er, slot... yes.    The ladies of CNBC and the directors who frame the camera angles, have always pandered to prurient interests.

firstdivision's picture

That was one of the best comments on Dealbreaker

zKeyserSoze's picture

riot...pisani has been suckin up all morning, more than the usual cheerleaders. get this pic

alexwest's picture

i cant get it what it is wrong with that ?
pppppplllllllleeeeeeeese guide me


TexDenim's picture

Sokol had a lot of balls to appear on CNBC with Becky (I love you Warren) Quick. He got out in front of the bad news. It will fizzle before the weekend. He may have shady ethics, but I don't think he broke the law. And he is $3 million richer as a result. Not a bad deal.

RockyRacoon's picture

Right now CNBC has Cramer on talking about the "ethics" of the deal.

I must be in some dreamland...

Don Birnam's picture

Indeed -- what's that in Ethical Jim's hand ? Why, it's a subpoena...and a "BULL" -ish one, by the look of it.

Roger Knights's picture

"Not a bad deal."


Jack Ryan's picture

In short, LMAO.  I wonder if a regulator can connect the dots.

nedwardkelly's picture

How much is the guy worth? Isn't the profit from this transaction chump change in comparison? So is this sort of thing just par for the course, or did this guy really just do it all for a sum he probably considers chump change?

Apostle of Unknown's picture

The guy just likes Lubrizol. Cut him some slack.

buzzsaw99's picture

Judging by his statements he must think people are extremely naive.

The Axe's picture

No one stands up...ever....including Uncle Festa

oogs66's picture

why was he guest host on CNBC today? 

ss123's picture

Making a little chump change here (hopefully under the radar) and a little chump change there (hopefully under the radar) soon adds up to real money (all under the radar).

wisefool's picture

+1. Especially if you do it the way he admitted he did it, for tax purposes. So I humbly offer corrections to Tyler's original work.

1. Buy stock, pitch to Warren

2a. Warren doesn't bite right away. sell, use it as a tax loss or minor gain.

2b. Warren bites, hold, till it is going to make too much in taxes.

3. Complain to a politician that this company is more important than any other company in the world, and that you would have continued to provide exempilary leadership, just like you Mr. Congressman, if it did not put us in the opressive tax bracket Warren's secretary has.

4. IF N+1 < 100,000,000 GOTO 1.

5. Donate enourmous wealth acumulated to legacy charity of choice. Because those lazy people who pay taxes aparrently don't have the money to do.

knukles's picture

Years ago there was a very serious, major landmark SEC case which established the "appearance of a conflict of interest" as factually relevant, material and illegal as bona fide conflicts. 
Wonder in this day and age how that precedent will be applied?
How do you say Wells Notice?

slaughterer's picture

And this guy was to be a successor to King Warren?  That is it.  I am selling all my BRK shares today.  But, wait a minute, Dougie Kass says I should buy BRK today.  I am confused.  Maybe Becky can help me understand.  Did Sokol commit something called ... "insider trading"? 

Cdad's picture


  1. Buy it in my PA
  2. Pitch Buffett
  3. Meet w/ the CEO
  4. Pitch Buffett again
  5. Buffett buys it
  6. Profit
Got it, Tyler.  Thanks. It is very complicated.  The legal bill will probably be huge.  Bullish, probably.  Increase in GDP.  And it presents itself as yet another credibility black hole for the BlowHorn to throw itself down, too.  And you can never have too many of those. At least none of us are being bothered with pesky stories about concrete smothering plutonium, or Europe on the edge of the abyss, or Japanese economic shutdown, or economic suicide on the docket in DC...and surely bubonic plague is loose somewhere and we are not being bothered with that, either. To any bull out there within earshot...enjoy your LAST rally.


Malaespina's picture

smart ass. no ethics whatsoever, and even worse, still believes nothing wrong! should work for gs or the grand satan.

buzzsaw99's picture

he has the look, and the (lack of) ethics. however, those who double cross the squid go to prison. it is the only law on wall street that is enforced.

quartshort's picture

The news clip I saw last night said that he resigned and will be working as a PHILANTHROPIST!!! I laughed so hard my family came into the living to see what they were missing. So let's get this right: LIE, CHEAT, and STEAL... then philanthropy when exposed.

I got your philantropy right here you fu&king jerk-off. 3 minutes alone w/ one of these pricks in a sound-proof room is all I ask.

miker's picture

There is something more to this than meets the eye.  This guy Sokol had wanted to resign earlier but got talked out of it by Uncle Warren.  Maybe he intentionally goofed around with this quasi-insider trading to get out.  Stranger things have happened.

Warren Buffett continues to thrive on his notoriety and "good name".  I wouldn't be suprised that we find a few "skeletons" in his closet when the dust settles.  Frankly, I'm tired of all this press and adulation for the man....much of it he encourages.  It would be nice to have more "humble" successful people in this country.

Harlequin001's picture

the circumstances don't exist today that would allow Buffet to repeat his past.

Now we find out just how good an investment manager he is when he doesn't have a CB capable of lowering interest rates and a populace unable to load up on debt.

'Show me not what it's worth but what it earns' is a great mantra when you have a central bank inflating the money supply but in an environment of collapsing credit you can show me what it's worth, because whatever it earns will shrink and disappear right before your very eyes...

Buffet is walking dead...

Careless Whisper's picture

sorry, i don't buy it. he made $3 million. chump change for a guy like him. did he mention this to friends and family? what about offshore accounts? let's see those cell phone records.


Boilermaker's picture

CNBC said that he 'only' made $3M on the scam and that is smallish when compared to his overall, it must be a misunderstanding.  He would never do it for 'only' $3M.

ziggy59's picture

3 million? Martha went to prison for a lot less...cripes people get years in orsion for stealing 3000 bux from a bank

Boilermaker's picture

Well, what's your bet that I would go to jail for stealing a $3 magazine?

pauldia's picture

For those of you who can watch the video, please go to the question Becky Quick asks of Mr Sokol; "Are there any more companies that were on the list?"  Check out Mr Sokols eyes , flttering, shifting and "fright or flight" thinking  He replies maybe one "small" bank." Folks, this isn't over. Wait to compare Mr Sokol's purchases with companies that were considerd by B.H.. Buffet will be tarnished and this might be a good time to short B.H. or at least exit.

AN0NYM0US's picture

He tried to resign in the past - similar reason? Uncle talked him out of it perhaps suggesting that everyone at BRK does it. Sokol once again tendered his resignation and Uncle now concerned that he still had a  'flicker' of consicence decided it was best to end the relationship.

As in any organization corruption starts at the very top.

Rogerwilco's picture

Sokol and Mozillo should get together now that both are unemployed. There are millions of mortgages out there that need the assistance of seasoned pros like David and Angelo. With a little federal start-up cash and their moral leadership, I'll bet they could turn that real estate frown upside down.

snowball777's picture

Get em all in one room and we can save money on hand-grenades.

Rogerwilco's picture

Too quick. Indians in the southwest would take people like them and stake them over an anthill.

TexDenim's picture

That would be great! Angelo Godzilla and Mr. Suck-all, mano-a-mano!

Hedgetard55's picture

That ol' Warren sees nothing wrong with it speaks volumes.

LongSoupLine's picture

The real problem?  The SEC likely believes "Lubrizol" is some sort of porn product and will, in turn, back-off of any investigation as not to self implicate themselves.