Andrew Sorkin: Buffett’s Ruthlessness Is Oddly Absent on Sokol

[Guest kumar]

 

http://dealbook.nytimes.com/2011/04/04/buffetts-ruthlessness-is-oddly-absent/?ref=business

 

 

[Guest Bronco]

I'll be honest - Sorkin reminds me of David Faber - a journalist without a business background.  Couldn't even read the article and I am not a fan of that guy.

 

Sokol lacks character and we all get it. 

 

I'm more interested in seeing BRK crater so I can pick up more shares.  Or maybe watch what the next purchase will be based on all the cash coming home to papa.

 

 

[Myth465]

Bronco I think you have your blinders on, due to your like of the Berkshire structure. You have basically come out pro insider dealing inmo.

 

Sorkin has the right idea. I am just surprised he wrote such a letter given that he will be the one picking questions. I wonder if he will still have that role or what Buffett thinks of this. Either way it took some balls.

[Guest Bronco]

Not pro insider dealing at all - just recognition that this will all pass soon, Sokol will not be fined or punished, no crime committed, shareholders not hurt at BRK IMO, victimless "crime" really.

 

To me, just another ahole in corporate America.  But there are thousands as far as I'm concerned.

 

I'm much more outraged, and surprised others aren't, at the Jerry Yangs, FMMH BODs of the world.  How about Sullivan from AIG?  Parsad mentioned about SOX a while back - if SOX meant anything how is Sullivan not fined or in jail?  How about Chuck Prince? 

 

I'm more pissed at Ballmer at MSFT costing shareholders billions than Sokol, who made shareholders millions or billions (as mentioned by Warren in the SH report).

 

All that being said, I didn't read Sorkin's article.  Much smarter people to listen to IMO. 

[Parsad]

I'm guessing Sorkin is just asking questions that all long-time shareholders of Berkshire would ask.  Sokol was a heartbeat away from taking over the company.  In many shareholder's eyes, this was material information and would be considered unethical to trade on.  Cheers!

[Myth465]

Bronco these are all quite good questions.

 

During Mr. Sokol’s interview on CNBC last week, he said, “I guess knowing today what I know, what I would do differently is that I wouldn’t have mentioned it to Warren and just made the investment and left it alone. I think that’s a disservice to Berkshire. But if that’s what people want to do in the future, that’s fine.”

 

Do you believe Mr. Sokol — to whom Citigroup floated the Lubrizol deal in his capacity as officer of Berkshire — had a fiduciary duty to run the idea past you? Or was he free to make a personal investment, without discussing a potential acquisition with you? What is Berkshire’s policy on such trading?

 

Mr. Sokol also compared his investment with one that Mr. Munger, vice chairman of Berkshire and one of your best friends, previously made — that is, buying a 3 percent stake in BYD, the Chinese electric carmaker, before Berkshire took a big share in the company. Was it an apt comparison?

 

¶You have said that Mr. Sokol did not do anything “unlawful.” But Mr. Sokol bought shares of Lubrizol a day after he told Citigroup to indicate Berkshire’s interest in buying the company.

 

Why don’t you consider that “material” information, a crucial component of insider trading? Do you not believe that a Lubrizol shareholder would have considered such information important to their investment decision? Clearly Lubrizol felt that Mr. Sokol’s inquiry was material enough to hold a board meeting on Jan. 6, one day before Mr. Sokol bought almost $10 million of shares.

 

If Mr. Sokol was aware of Lubrizol’s board meeting, would you consider that material information? And if a news outlet had reported Mr. Sokol’s inquiry or Lubrizol’s decision to meet, do you not think that the price of Lubrizol’s shares would have risen?

 

Here is another way to think about it: If a Citigroup banker had bought shares of Lubrizol at the same time as Mr. Sokol, would you have considered that insider trading? Isn’t that the definition of insider trading? What did Mr. Sokol do that was different?

 

----

 

What do you think of the last one. You are talking about bad capital allocators. While horrible its not a crime, not yet. Everyone else is talking about potential criminal activities. Would you be pro Citi employees trading on similar info, were Lubrizol’s shareholders who sold not harmed?

 

Is it ok to do whatever you want as long as you make money?

[Guest Bronco]

I think that Sokol is a jerk.  But I don't think, and I may be wrong, that insider trading applies to something so contingent as this. 

 

I'd be interested to see how this is different and how this is similar to Buffett back in the day when he held all the investment vehicles and his personal account, etc...I believe he testified before Congress??? 

 

Regardless - a $3 million finder fee for a business Buffett green lighted isn't so bad as a shareholder.  What's eating you Myth is that an unethical ahole can get away with making millions.  Maybe I would have been more pissed 5 years ago, but he may be a little puppy in the dog pound of aholes that we have seen lately (banking crisis-pick one, Barney Frank, Roberto Luongo, Madoff, Biglari, Fremont, CAW). 

 

People already forget about Apple and the options repricing - that was worse than this IMO. 

[Guest Bronco]

I almost forgot the biggest ahole of all - Eliot Spitzer (former client of Cramer)

 

We should have a new thread - biggest ahole.  See if anyone can top my pick of E.S.

[Myth465]

Regardless - a $3 million finder fee for a business Buffett green lighted isn't so bad as a shareholder.  What's eating you Myth is that an unethical ahole can get away with making millions.  Maybe I would have been more pissed 5 years ago, but he may be a little puppy in the dog pound of aholes that we have seen lately (banking crisis-pick one, Barney Frank, Roberto Luongo, Madoff, Biglari, Fremont, CAW).  

 

Lol its not a finders fee. Its insider dealing. Thats what eating me. Actually I dont care, and agree with you this will be gone in a few weeks / months. This too shall pass.

 

I dont care but it sounds like insider dealing / front running. I like to call a spade a spade when I can. Buffett has special exemptions permitting him not to disclose stock ownership till he is done buying. Its cause he can move markets. Sokol amassed a huge position coincidently shortly before Buffett bought for a $3 million gain. That doesnt smell right. Not much different then that Goldman guy who is on trial right now.

 

Front running probably happens every day of the week. But if you turn a blind eye to it when its obvious and caught then things will only get worse. I can say

 

1. This isnt material to Berkshire.

2. People are making too big of a deal out of this.

3. This too shall pass from the headlines.

 

4. Sokol deserves the book if the dates, and disclosures all look funny. Martha Stewart got the book, that Goldman guy may get the book, Sokol should get the book if the facts support it.

 

Legally its for the SEC to take care of but morally it doesnt smell right at all.

 

I like Spitzer lol, though I dont know much about his history except that he got caught with his pants down. I would say Mozillo is probably the biggest ahole.

[Buffetteer]

I agree with you Myth, I thought it was a great article and I have to credit Sorking for showing some independence and asking the tough questions.

 

"Victimless crime" if you don't count the LZ shareholders who sold their shares to Sokol for $104 before having all the facts presented to them.

[Hershey]

Assuming he had twice tried to resign, Sokol was not going to be running Berkshire as WEB's successor.  The loss to Berkshire is that Sokol brought deals to WEB's attention, and now WEB may not see those deals. 

[woltac]

Sokol's defense of his actions is laughable.  He should cut a deal with the SEC now, pay a civil fine and be done with it.  It is always amazing to me how human nature prevents even highly intelligent people from admitting when they are wrong. 

 

I am not a Sorkin fan, but if he did not ask any questions about this mess he would really be useless. 

 

 

[seshnath]

I agree with you Myth, I thought it was a great article and I have to credit Sorking for showing some independence and asking the tough questions.

 

"Victimless crime" if you don't count the LZ shareholders who sold their shares to Sokol for $104 before having all the facts presented to them.

 

Don't forget us, the BRK shareholders who paid for Citi's research that turned up LUZ as a potential buy and allowed Sokol to make a profit.

 

If Sokol were a CFA Charterholder, he would have violated code VI B of Standard of Conduct

 

Priority of Transactions. Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.