Warren Buffett admits 'big mistake' over David Sokol
Warren Buffett has admitted he made a "big mistake" in not quizzing former top executive David Sokol about his share purchases in a company he recommended Berkshire Hathaway buy, an episode that has mired the billionaire in his biggest controversy for decades.
By Richard Blackden, Omaha, Nebraska 7:43PM BST 30 Apr 2011"I obviously made a big mistake by not saying 'when did you buy it'"," Mr Buffett told the more than 30,000 Berkshire shareholders at the company's annual general meeting in Omaha, Nebraska.
A report last week from Berkshire's audit committee accused Mr Sokol of making "misleadingly incomplete" disclosures about $10m of shares he acquired in Lubrizol, a US chemicals maker he suggested in January that Berkshire consider buying.
Mr Sokol, who resigned at the end of March, has said he's done nothing wrong.
The incident, which the Securities and Exchange Commission is reported to be investigating, has prompted criticism of internal controls at Berkshire, Mr Buffett's judgement and intensified anxiety on Wall Street over who will eventually succeed the 80 year old.
Mr Sokol first suggested Lubrizol as a possible acquisition to Mr Buffett on either January 14 or 15 and told him he owned shares in Lubrizol.
"When someone says to me "I own the stock" it doesn't seem to me like he bought it last week," Mr Buffett said at the meeting.
Mr Sokol, who had been with Berkshire since 1999 and was widely seen as a possible successor to Mr Buffett, bought shares in Lubrizol in the middle of December and early January.
Mr Buffett, who has advertised the ethical standards at Berkshire as one of the company's greatest virtues, described Mr Sokol's actions as "inexcusable and inexplicable."
"I don't think there's any question about the inexcusable part. Dave violated the code of ethics, Dave violated our insider trading rules," he said in response to questions from shareholders.
Mr Sokol has a net worth in the "very high numbers", Mr Buffett said, adding that the former executive had given up the chance for a further $12.5m in compensation when Berkshire were first working out his compensation package when he joined the company.
Barry Levine, Mr Sokol's lawyer, said that "I know him (Mr Sokol) to be a man of uncommon rectitude and probity. He would not, and did not, trade improperly, nor did he violate any fair reading of the Berkshire Hathaway policies."
In a question and answer session in which there were several about Mr Sokol, Mr Buffett said that any assumption that Mr Sokol had been the frontrunner to succeed him was questionable.
At the time of Mr Sokol's resignation, Mr Buffett said that he had persuaded him twice not to resign in the last few years.
The billionaire said that there is now a leading candidate to succeed him and "I would lay a lot of money that I think he is as straight as an arrow."
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