Skip to comments.Warren Buffett Lieutenant Resigns Amid Stock Purchases (Insider Trading)
Posted on 03/30/2011 4:29:17 PM PDT by Lazlo in PA
In a very surprise move, a longtime lieutenant of Warren Buffett, David Sokol, resigned from his position at Buffetts Berkshire Hathaway. Sokol had been considered a possible successor for Buffetts post as CEO of Berkshire Hathaway.
Buffett also dropped a bombshell in a letter about Sokol: he said Sokol had purchased shares of Lubrizol, a specialty chemicals company which Berkshire announced it is buying, before Sokol convinced Buffett on the merits of the deal.
(Excerpt) Read more at blogs.wsj.com ...
um, does that constitute insider trading? Buying a stock that don’t belong to you and trying to convince others to buy the same stock
now that’s a conflict of interest: buy this company...I own lots of shares. Trust me, it’s a good deal ;)
>> um, does that constitute insider trading?
No. He didn’t break any laws.
Sleazy? Maybe. Depends.
On the one hand, if you hired a guy to pick stocks for you, would you want to buy stocks he recommended that he wouldn’t buy himself?
On the other hand, if he only bought his share because he new that after you bought your HUGE share his smaller share would go up...
Sounds like a private matter for Berkshire Hathaway to arbitrate.
Buffet is too old school wasp. It’s just the new capitalism. Make Sokol Commerce Sec.
I would have dismissed this as an inside matter, but the letter Buffett felt the need to write on the matter was unusual. I get the impression that Buffett thinks there is something more to this and he his looking for deniability.
In this case, he knows if Buffet greenlights BH investing in said company, those shares he bought become much more valuable....guilty
Probably suspects this isn’t the first time he’s done this and a investigation into this time will lead to other times.
See SEC Rule 14e-3:
I’ve never understood the fascination with Buffet and Berkshire Hathaway. It’s basically a type of mutual fund in that they constantly buy companies — but they don’t pay a dividend to the investors. Where’s the cash that the acquisitions throw off? If the parent company owns above a certain percentage of a subsidiary, the dividends back to the parent are taxed at a low rate, or not at all. So — where’s the cash?
Anybody who thinks Buffet is “all that” needs to read Benjamin Graham. When I taught college classes, I recommended that all students study two books: the Holy Bible and the Intelligent Investor.
but, nah, now that I think about it, I'm sure they'd addressed stuff like this. I'm sure it's in his contract to leave his personal account alone so as to avoid even the appearance of impropriety. If it wasn't, Buffett couldn't have fired him.
This is classic insider trading.
The dividends go back into investments. Not everyone wants dividends. Have you looked at the performance of Berkshire B?
Warren in handcuffs, I like it.
There is a lot more insider info leaked and/or “taken advantage of” by employees than you could ever believe -
One - back several years involved US Surgical stocks - check it out - I knew what was going on well in advance
As for Judges, Justices, and those ‘overseeing’ agency things -
It is not as if they would bend/break the law for financial gains
It is only how much their price is - and how secure and free they remain
This include SCOTUS - I also consider obvious corrupt political bias in decisions to be a bribe or payoff too - Our latest two Justices appointed by Obama and approved by Harry Reid’s US Senate are perfect examples of prime candidates for impeachment, conviction, and removal from the Supreme Court
I would not be upset for over five minutes by faster and more punitive methods
As for Warren Buffett - he was a huge supporter of 0ponzi and backed his TARP and endless bailout scams
- And Buffett has made a ton from doing so since the US economy and major businesses ‘mysteriously’ and ‘unexpectedly’ got a soreass.....
Never steal anything small - ask Lohan and Rich
Sokol’s on CNBC right now doing some damage control.
No, this is not insider trading. Unethical yes, but not illegal. Sokol bought shares in January for his personal account because he liked the company and its business model. The guy’s rich - him throwing $10 million at a company he likes is nothing.
After looking more closely at the company, he realized it’s a real good business model and would be a good acquisition for BH. Stuff like this happens all the time at all levels of investing when you work on the buyside, and there’s nothing illegal about it.
At this scale (tho’ (when your company is going to acquire a company you recently bought personally) the ethical thing to do would be to divest the personal shares before the acquisition announcement.
Sokol didn’t do that, so bye-bye.
They don't pay dividends because dividends are taxable income. One need not pay taxes on unrealized capital gains. BH has some $34 Billion in cash.
Had a Koch or any conservative done this we would be watching their frog marches on continuous loop play on all the MSMs
I need facts.
What was the timeline between Sokol’s buys and him pitching the company. Did he do/use Bershire’s research to evaluate the purchase?
A corporate insider has different responsibilities than you and I.
The fact that it “happens all the time” does not affect the legality.
As I understand it, the timeline was such that this was just unethical and not illegal. I’m sure there will be an SEC investigation, so we should see ‘proof’ thru that. I have none, but I also know of none to contradict my understanding.
I agree with you wholeheartedly on the “happens all the time” point. Some times the situation is illegal, some just unethical, and some totally above-board.
This appears to be the mid-case.
Read Buffett’s letter. This was the third time this guy did this and Buffett had no problem with it!!
Yep. That is an excellent point.
These guys always look like they could wear a prison suit very well. ....or thugs from the mafia....called “Investors” I call most of them crooks in sheeps clothing.
Bingo. I have never thought Warren Buffet was this lovably successful furball stock marketeer he fobs himself off to be.
Recent stock market heros mostly got there on timing schemes. In other words, they have lightening fast keyboard fingers. Got rich without providing any value added to a stock’s value. I give you NY’s Bloomberg and NJ’s Corzine as cases in point.
Timing schemes should be outlawed.
I would imagine that insider trading happens CONSTANTLY.
How could it not happen? It is just a matter of WHO gets caught.
Add to that the members of congress who own stock and are in a position to make laws that will affect the value of that stock! Talk about a conflict of interest. No wonder a senator is often willing to spend millions of his or her own money for a job that pays $175K a year (um, in reported income).
I have the same impression of him. Whether it was his back room deals with politicians to do his "asbestos" deals or his do as I say, not as I do with his private jet firm. He is always doing shady things making extra special care in looking like this simple old stalwart of propriety and honesty. This is just the first time someone has actually caught Buffett in their real business model. Lie, cheat, bribe till you make your buck. That is why this guy is still cheerleading Obummer even after all his proclamations failed. He needs protection from the Pres.
“Ive never understood the fascination with Buffet and Berkshire Hathaway.”
Becoming the most successful investor and richest man in the world gets peoples attention. 22% per year compounded over 40 years is pretty good.
Yes, its mostly (but not totally) Graham-Dodd investing, but I think the low dividends are due to his being able to find better uses of the money via re-investment.
“Mr. Sokol’s interest in Lubrizol began after Citigroup bankers presented a list of “possible transactions” to him last fall, according to an SEC filing released Friday by Lubrizol. On Dec. 13, Mr. Sokol and the bankers met to discuss the list, and he expressed interest in Lubrizol, according to the filing.
Mr. Sokol asked Citigroup to relay to Lubrizol CEO James Hambrick his interest in meeting to discuss Berkshire and Lubrizol.
Mr. Sokol made his first personal purchase of Lubrizol shares the next day, buying 2,300 shares, according to Wednesday’s statement. He sold the shares a week later, it said.
On Jan. 5, 6 and 7, Mr. Sokol bought 96,060 shares of Lubrizol, based on an order he placed to buy 100,000 shares at up to $104 a share, the statement said. On the 6th, the Lubrizol board met to discuss Berkshire’s interest, the Lubrizol filing said.
Mr. Sokol held his shares as he talked with Mr. Hambrick on Jan. 14. Their conversation was generally about “corporate cultures and philosophies of both Berkshire Hathaway and Lubrizol,” according to the filing. The two men arranged to meet in person on Jan. 25.”
I think the SEC has a case.
“I think the SEC has a case.”
You could be right, but I’d bet against it. BH only buys a small handful of companies like Lubrizoil every year, and someone like Sokol wouldn’t have been doing his job if he wasn’t pitching at least one idea every month. His take-up rate is probably 1 in 6 or so. He wouldn’t have had any idea if the BH board would have accepted the acq or not. And the Dec buy/sell seems to me like even he was unsure, tho’ he convinced himself later obviously. But the Dec trade may have been a tax thing - who knows?
Again, we’ll see, but I’d bet you two FR$ on the outcome, if FR$ existed...
HUGE violation of corporate ethics and most likely policies.
1.Buy the stock.
2.Convince your company to buy the stock, which will most likely inflate the price.
He had a duty to tell the company that he was buying or owned the stock.
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