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March 31, 2011 at 04:20 AM
The abrupt departure on Wednesday of David Sokol, Warren Buffett’s heir apparent to take over management of Berkshire Hathaway, has raised eyebrows and caused the company’s stock to fall. At issue is Berkshire’s recent acquisition of Lubrizol Corp., a company in which Sokol apparently bought shares prior to his eventually successful pitch of the acquisition to Buffett.
As of 2:00 PM New York time Thursday, both the A and B shares of Berkshire Hathaway were down 2% in active trading, while the DJIA was up four points for the day and the S&P 500 was up a point. Lubrizol ’s shares were unchanged.
A New York Times report says that Sokol tendered his resignation abruptly on Wednesday, surprising not just Buffett but also those within Berkshire. Buffett said that he had spoken with Sokol the previous day and “received no hint of his intention to resign.” The report also quoted Buffett as saying the resignation was a “total surprise to me.” Sokol had tried twice previously to resign, and Buffett had successfully talked him out of it.
The s
uddenness of Sokol’s departure calls into question Berkshire’s pending purchase of Lubrizol, a company in which Sokol (left) held shares and which he pitched to Buffett as a potential target for acquisition. According to a Reuters report, Sokol purchased shares in Lubrizol prior to pushing it to Buffett, and the "Oracle of Omaha" mentioned that fact in the release announcing Sokol’s departure. He said that Sokol had bought shares in December, sold them, and then purchased more in January—quite a bit more, according to the report. The transaction has now raised eyebrows and raised the specters of possible insider trading and lack of transparency.
