Mislead. Insidious. The opposite of the truth.
It is not my words. They are Berkshire Hathaway(NYSE: BRK - A - News) NYSE: BRK - B - News) Audit Committee, which has just published a report on the resignation of the former Executive David Sokol. Sokol bought 10 million shares Lubrizol earlier this year. Berkshire purchased Lubrizol weeks later, after pressures of the Sokol, making trades feel awfully suspicious. (For more information, see here).
The Committee are as follows:
"The morning of March 14, Berkshire Hathaway and Lubrizol announced the signing of the merger agreement." A representative of Citi with which Berkshire Hathaway does business congratulated Mr. Buffett on the merger agreement and said Mr. Buffett that Citi's investment banks had brought Lubrizol to the attention of Mr. Sokol. It was the first time, Mr. Buffett has heard that investment banks played a role in the introduction to Lubrizol to Mr. Sokol, and did not square with Mr. Sokol note in January that he had just whether Lubrizol owning the stock.
"At the request of Mr. Buffett, Berkshire Hathaway CFO Marc Hamburg téléphoné Mr. Sokol March 15." Mr. Hamburg asked Mr. Sokol for the details of its capital stock of Lubrizol. Mr. Sokol provided the dates and the amounts of its purchases of Lubrizol. Mr. Hamburg also asked on the role of the ISIC in introducing Mr. Sokol at Lubrizol. Mr. Sokol replied that he thought that he had called a banker, that he knew to Citi to obtain the telephone number of Hambrick [Lubrizol CEO James]. When Mr. Hamburg noted that it sounds as if the banker must have exaggerated his role when he met with his colleagues, Mr. Sokol does not contradicted him. ?
Press release March 30 Buffett is not of any note of what appears to be the scepticism of the Sokol trades. There is no mention of Appeal Hamburg, which is strange, because it seems that the first stage of a survey of behind-the scenes. The original announcement implies that Buffett had no problem with the timing of the trades of the Sokol, which the audit report now somewhat contradicts.
But how Sokol disclosed his game to Buffett and why Buffett was originally OK with it now seems clear:
"He did step cross the mind of Mr. Buffett at this time that Mr. Sokol may have purchased Lubrizol shares after research through investment banks to initiate discussions with Lubrizol regarding a possible acquisition Berkshire Hathaway of Lubrizol.". Because the comment of Mr. Sokol about possess shares was in response to the question of Mr. Buffett how Mr. Sokol came to know the company, he implied that Mr. Sokol had followed Lubrizol as an owner of his shares and in this way came to think of Lubrizol as an acquisition of Berkshire Hathaway possible. ?
It really is the essence of this issue. That Sokol bought shares of Lubrizol before same Berkshire purchased the company is not what is suspicious. It is that he bought shares after a banker Citi brought the company to his attention in an acquisition of Berkshire as possible.
The Audit Committee continues:
"The actions of Mr. Sokol did not comply with the duty of full disclosure inherent in Berkshire Hathaway policies and prescribed by the law of the State.". His remark to Mr Buffett in January, revealing only that he had a stock of Lubrizol, said Mr. Buffett that he needed to know. In the context of Mr. Buffett question how Mr. Sokol met Lubrizol, its effect was to mislead: it implied that Mr. Sokol belonging to the stock exchange before he began taking into account the Lubrizol as candidate acquisitionWhen the truth was the opposite.
"Response of Mr. Sokol to CFO of Berkshire Hathaway, m. Hamburg, concerning investment banks similarly did not meet the level of sincerity of a corporate trustee and suggests its response to Mr. Buffett's first survey mentioned above was intended to deceive.".
No mincing no words. "Fool" and "deceive" is on the tougher language, I see a former employer using in a situation like this, where the credibility of the Berkshire, not only of the Sokol is at stake. If felt Berkshire Sokol nothing wrong yet chose to resign simply for the optical issues, he could have said. But the report makes it clear: it was not a good faith error. It is so unclear initially purchased Sokol Lubrizol in good faith. How he managed the next day, however, is. And it seems not good.
Is what makes it evil reputation of Berkshire? I do not think physically. If anything, it points out that the company has a zero tolerance for what either far from the ethical perfection. "Mr. Sokol threatened the reputation of the Berkshire Hathaway or the would have done if he remained with the company," writes the Audit Committee. That Sokol would have been fired had he resigned step seems likely. Remember warning Buffett since the beginning of the 1990s: "losing money for my business and I will understand;" losing the slightest reputation of the company, and I will be ruthless.
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