In a 25-minute phone call with FOX Business on Friday, Warren Buffett’s former business manager, David Sokol, spoke extensively about being vindicated by the Securities and Exchange Commission after a nearly two-year-long investigation into questionable trades Sokol made in the stock of a company Buffett later purchased.
“I couldn’t be happier with life as it exists right now,” said Sokol, who has started a private equity firm called Teton Capital with “family money.”
No doubt his happiness is buoyed in part by word the SEC has decided not to pursue insider-trading charges against Sokol. The original issue arose after Sokol, a trusted manager of two major Berkshire Hathaway businesses, purchased millions of dollars of stock in chemical company Lubrizol in December of 2010, just before suggesting to Buffett he ought to consider buying the company outright.
Buffett purchased Lubrizol in early 2011, the stock jumped and Sokol made millions on the trade. By March of 2011, Sokol resigned, saying he wanted to spend time with his family and start his own investment business. It was just days later that shareholders questioned the stock purchase.
Buffett and Berkshire’s audit committee investigated and announced Sokol had violated Berkshire’s by-laws. At the time, Buffett told FOX Business, “(David Sokol) misled us... his behavior is inexcusable.”
While Berkshire’s internal investigation castigated Sokol’s trading behavior, word came Friday that the SEC declined to pursue charges. Sokol told FOX Business the SEC was professional in its investigation.
“I told (the SEC) I would give them whatever they needed for their investigation. I said, ‘Give them everything they need going back to when I was a child. The SEC did their job, interviewed a zillion people, got hold of tons of documents” and in the end backed off.
The SEC had no official comment but experts say insider-trading violations are notoriously difficult to prove and that the commission won’t pursue a case it’s not totally sure it can win.
“It’s odd,” Sokol told FOX Business, “when you get that phone call where they say you didn’t do what you know you didn’t do you’re happy about it, but it dredges up old feelings.” Regardless, he said he’s “thrilled that the SEC made the conclusion.”
However, Sokol had no kind words for the man who was his close confidant for more than a decade.
“I haven’t spoken to Warren and I don’t want to...the notion that I violated some company policy is absurd. Warren always said to me, ‘Take the opportunity to invest your own money and if you ever see something you really like, I’ll take a look at it.’”
Sokol also slammed the Berkshire audit committee. “They claimed they interviewed me three times about the matter. That’s a categorical lie. Never once did they interview me about it. Ask them for a date and time. It never occurred.”
FOX Business reached out to Buffett who said he had “no comment” on the Sokol matter. However, in 2011, Buffett told FBN that Sokol misled him and the company on many levels, including taking credit for the Lubrizol idea where it had later become clear it was Citibank investment bankers who had been the people to originally flag Sokol that Lubrizol was a smart investment idea.
Sources confirmed to FOX Business at the time that Citi bankers were indeed the ones who passed the Lubrizol investment idea to Sokol, who they hoped would serve as an idea ‘middleman’ of sorts between Citi and Buffett.
Sokol denied doing anything wrong. “The only mistake I made is that I should have resigned two years earlier than I did. I tried to but Warren talked me out of it.”
Liz Claman joined FOX Business Network (FBN) as an anchor in October 2007. She anchors Countdown to the Closing Bell which is presented from 3-4pm EST as well as co-anchors After the Bell from 4-5pm EST.