LEGENDARY investor Warren Buffett has admitted personal error in handling his rogue lieutenant David Sokol, the Berkshire Hathaway dealmaker who stands accused of insider trading.
The chairman and chief executive of the US firm said he was wrong not to press Sokol about purchases of Lubrizol stock in the run up to its $9bn (£5.4bn) takeover bid.
“I obviously made a big mistake by not saying, ‘Well when did you buy it?’” he told shareholders at Berkshire Hathaway’s annual general meeting in Omaha at the weekend.
The US Securities and Exchanges Commission (SEC) is said to be probing Sokol over the purchase of stock in the chemicals firm, which he bought whilst simultaneously pitching it as a possible takeover target.
Buffett added that Sokol had violated his firm’s insider trading rules by failing to disclose a January share purchase, less than four weeks after starting talks with bankers from Citigroup about the company.
Sokol had been a rising star at the investment firm and was widely tipped to succeed 80-year-old Buffet as chief executive.
But he resigned last month after his Lubrizol stake was revealed. Sokol landed a $3m windfall after Berkshire agreed to buy the firm.
Criticisms of Buffett were initially aired after the billionaire failed to condemn his former right-hand man, yet he changed tack at the weekend to label Sokol’s actions “inexcusable and inexplicable”.
Buffett said yesterday that he didn’t feel his reputation had been damaged by the affair overall.
He also added that he did not know if he would be called as a witness in an SEC probe into the alleged irregularity.
TIMELINE | SOKOL’S LUBRIZOL DEALINGS
● Autumn 2010
Sokol requests Citigroup investment bankers come up with a list of targets for Berkshire Hathaway. Citi gives him a list of 18 companies, including Lubrizol.
● 13 December 2010
Sokol discusses the list with Citi and says Lubrizol was the only company he found interesting. He asks a Citi representative to tell Lubrizol CEO James Hambrick that Sokol was interested in meeting to discuss a deal.
● 7 January 2011
Sokol buys 96,060 Lubrizol shares after placing a 100,000-share order with a $104 per-share limit price.
● 15 January 2011
Sokol suggests buying Lubrizol to Buffett, with a "passing remark" that he owned some stock in the company.
● 14 March 2011
Berkshire announces a plan to buy Lubrizol for $135 per share.
● 19 March 2011
Buffett learns the details of Sokol's purchase of Lubrizol shares.
● 28 March 2011
Sokol's assistant delivers his letter of resignation to Buffett. Buffett says he did not ask for the resignation and that it came as a surprise.
● 30 March 2011
Buffett announces Sokol's resignation. He says: "Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign."
● 27 April 2011
Berkshire announces that its audit committee is considering the possibility of legal action against Sokol and that it would cooperate with any government investigation. It says Sokol’s “misleadingly incomplete” disclosures “violated the duty of candour” he owed to Berkshire.