Warren Buffett Quotes

Warren Buffett is almost as famous for his quotes and one-liners as for his investing - see this selection of Warren Buffett Quotes on Life

Monday, 25 April 2011

Warren Buffett Sued Over Sokol

Warren Buffett Sued by Shareholder

Warren Buffett's image has always been one of absolute probity but is seems to have been somewhat tarnished by the recent Sokol-gate affair, when David Sokol advised the Oracle of Omaha to take a look at Lubrizol even though he himself already had shares in the company.

This decision by Sokol seemed odd to many and 21 out of 23 top U.S. investment bankers polled at the Global Mergers and Acquisitions Summit organised by Reuters have stated that in their opinion Sokol should not have traded in Lubrizol. It now turns out that Warren Buffett and the Board of Directors of Berkshire Hathaway are being sued by over presumed trading in the stock of a company that was later acquired by Berkshire, by David Sokol once considered to be candidate for Buffett's position.

David Sokol was also named in the lawsuit - Kirby v. Sokol et al, Delaware Chancery Court, No. 6392. He resigned after revealing he had bought shares in Lubrizol before suggesting the company to Berkshire Hathaway as a possible acquisition target.

The lawsuit has been filed by Berkshire Hathaway shareholder Mason Kirby and it calls upon Sokol to relinquish any improper gains to Berkshire. It also calls for Buffett and other directors to compensate Berkshire for the damage caused by them to the company's reputation and goodwill.

The affair has raised questionas to whether Sokol might be charged with insider trading, and also about the 80-year-old Buffett's oversight of Berkshire, and whether controls should be tightened.

The $9 billion acquisition of Lubrizoal was announced on March 14, immediately increasing the value of Sokol's own stake by $3 million.

Tuesday's lawsuit said "Sokol's actions and Buffett's inaction significantly impaired the reputation of Berkshire and constituted breaches of their duty of loyalty to Berkshire and its shareholders."

Sokol has said his Lubrizol trades were not unethical and both Sokol and Buffett have said that in their opinion Sokol did nothing unlawful.