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Sokol and Biglari


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Since there are many fans of Biglari in this board but not as many fans of Sokol, just wanted to contrast these two folks. Both are hard charging people that are very smart and very driven.


As for ethical behavior, I think Biglari ranks lower than Sokol. Sokol is definitely richer of the two with a networth of about ~100 million or more whereas Biglari is probably in the range of ~7-10 million.


I am surprised SEC didnt go after Biglari as everyone was probably busy clapping. I dont think what Sokol did is illegal. Sokol will look like Mother Theresa at SNS but doesnt pass the ethical bar at Berkshire.

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From what I have read so far, Mr. Sokol looks culpable because he met Citi investment bankers and not the wealth management guys. As an ex-M&A banker, I can tell you that if I am meeting a guy like Mr. Sokol, I am talking to Berkshire unless he expressively states that he is there in a personal capacity in which case I would have talked to him about a lot smaller companies (than LZ) given the relative size of his checkbook vs Berky’s . In Dec meeting, Citi must have shown him 10-15 “elephant-size” ideas in general which would Buffett criteria of what Berky could buy.  These initial meetings are to gauge client’s interest for a deep-dive on a potential M&A idea and/or to get CEOs talking. Even if in the first meeting, citi bankers did not discuss non-public information I would think that in the subsequent meetings they did. If the Citi bankers are doing their job competently, they would have shared  non-public information because as a banker you are telling the client (i.e., Berky) something which is not well known or misunderstood about a business and potentially non-public information such as target CEO's willingness to do a deal, etc. The whole idea of such meetings is to highlight the business in the most favorable light for a potential M&A deal. There is an underlying assumption that the discussion is absolutely confidential. I don't know whether the non-public information was discussed or not. But for Mr. Sokol to say that he was meeting Citi bankers in personal capacity is completely naive IMHO. Even if you give him the benefit of the doubt, the timing of the purchase is so close that it does not pass the smell test.


If I were him, I would have called general counsel or outside counsel as soon as Mr. Buffett showed interest in pursuing the discussions.

For him to say Mr. Munger bought BYD before bringing it to Berky is a complete misdirection. One has to understand the timing of Charlie's purchase and the beginning of Berky's involvement. One has to know how many quarters had gone by between Mr.  Munger's purchase and serious investment discussion between BDY and Berky. What kind of material non-public information Mr. Munger had before he made his purchases. So that is a different situation in my opinion.


Let's think the other way around - would citi compliance allow bankers to buy the stake around the time Mr. Sokol bought it for the second time? The answer is definitely no! As soon as a deal starts to heat-up, it is logged with compliance in the banks to avoid such situations. All the team members esp. on the M&A side (industry bankers are generally prohibited from investing in their clients) would be stopped from doing any trades in LZ. I am not suggesting that the banks have the best compliance procedures. All I am saying is that Mr. Sokol was either grossly ignorant or did cross the line willingly. I hope it is the former for us Berky shareholders.




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