A Berkshire Hathaway chairman's actions may trigger government probe

Yet that carefully cultivated image — the envy of nearly every top executive — risks being tarnished by a disclosure that he knew one of his right-hand executives had bought shares in a company before Buffett’s company announced a deal for it.



David Sokol's actions in a $9 billion acquisition by Berkshire Hathaway Inc. will trigger a government investigation, a former federal enforcer said Thursday, but are unlikely to result in sanctions against him.


Still, the ethical issues behind Sokol's trades in Lubrizol Inc. are magnified by the high-integrity reputation of his former boss, Omaha investor Warren Buffett. Thursday brought a firestorm of criticism that Sokol's stock purchases were improper and that Buffett should have reacted more strongly.

“It's anti-capitalism. It's anti-America. It's wrong,” said Tim Mazur, chief operating officer of the Ethics and Compliance Officer Association of Waltham, Mass., a national corporate ethics group. “It's just greed and self-interest.”

The Wall Street Journal, citing unnamed sources, said Thursday that the Securities and Exchange Commission is considering an investigation, and already had been investigating trading patterns of Lubrizol stock. It's not unusual for the SEC to look at trading that occurred before the announcement of a big deal.

“A senior executive in a company trading in an acquisition target and makes $3 million? The SEC's going to look at it. That's their job.” said Peter Henning, a law professor and former attorney with the SEC. “But I don't think they're going to make a case.”

Buffett is chairman and CEO of Omaha-based Berkshire, and Sokol was chairman of three of its operating companies. Buffett announced Sokol's surprise resignation Wednesday, saying he did not try to talk Sokol out of resigning as he had on two earlier occasions.


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And here is Berkshire Hathaway's ethics code. Click here.