Published March 31, 2011
Former Berkshire Hathaway (BRKa.N)(BRKb.N) executive David Sokol on Thursday said he has invested in companies he then recommended for acquisition in the past, a day after Berkshire disclosed Sokol pushed Lubrizol Corp (LZ.N) to Warren Buffett after investing in it.
But Sokol said on CNBC if he had it all to do again, he would have invested in Lubrizol for himself and not passed the recommendation on to Buffett. He said he did not expect Buffett to want to buy the company and was surprised at how quickly the "Oracle of Omaha" moved to make a deal.
Sokol was seen by many investors as the most likely successor to Berkshire Hathaway's iconic CEO, though he made clear in the interview he did not aspire to the job and wanted to build his own "mini-Berkshire" instead.
Buffett released a letter on Wednesday disclosing that Sokol bought a substantial stake in Lubrizol before urging Buffett to acquire the company, which Buffett did for $9 billion this month. Sokol appeared to have made a profit of at least $2.98 million on his investment.
A well-known securities class action lawyer said on Thursday that institutional investors have already been in touch on the disclosures.
"The timing and the facts surrounding the transaction have justifiably raised an interest and concerns from three of my clients," said Darren Robbins, a partner in the firm Robbins Geller Rudman & Dowd.
"We do know David Sokol to be an honorable man," Robbins added, noting his firm will further evaluate the situation before deciding on any lawsuits.
'CAN UNDERSTAND THE APPEARANCE'
But in his half-hour CNBC interview, Sokol insisted he never had any inside information on Lubrizol and that he bought the shares solely as a good investment for his family.
"I'd like to invest my own money, control a significant piece of it, and control my own schedule," Sokol said, later adding, "I didn't know anything others don't know."
Sokol also said he has on past occasions invested in companies that he suggested Buffett buy, noting one example of a bank that Buffett did not ultimately acquire.
He also said other Berkshire executives have in the past held stock in companies they then identified for investment or acquisition, citing the example of Berkshire Vice Chairman Charlie Munger owning a stake in Chinese car maker BYD (1211.HK) before suggesting it for an investment.
Nonetheless, the chairman of Berkshire units MidAmerican Energy and NetJets told CNBC's anchors he understood how the sequence of events looked, even if he did nothing wrong.
"I can understand the appearance of an issue ... That's why we made it public," he said.
Sokol resigned March 28. He said Buffett did not try to talk him out of resigning. Buffett's letter included an excerpt of Sokol's letter, but the full Sokol letter was not made public.
Berkshire's Class B shares, which are more heavily traded than its Class A stock, fell 2.3 percent to $83.53 in mid-afternoon trade, making them the largest decliner among S&P insurance shares (.GSPINSC). It was the stock's biggest single-day decline on a percentage basis in about a month.