Berkshire committee finds David Sokol have violated trade policies

Berkshire committee finds David Sokol to have violated trade policies

3:51 PM, 28th April 2011
Berkshire committee finds David Sokol to have violated trade policies

OMAHA, US: Berkshire Hathaway’s audit committee has considered the conduct of David Sokol in connection with his trading in the shares of Lubrizol and has determined that it violated its ethics standards. A report released by the audit committee said in particular – Sokol’s purchases of Lubrizol shares while serving as a representative of Berkshire Hathaway in connection with a possible business combination with Lubrizol violated company policies and its insider trading policies and procedures.

Former executive David Sokol asked investment bankers at Citi for details on three possible acquisition candidates in the chemical sector, including Lubrizol. Berkshire announced a deal to acquire Lubrizol for $ 9.7 billion on March 14. Sokol resigned from Berkshire on March 30 after it was disclosed that he had acquired nearly 100,000 Lubrizol shares in early January, one week before mentioning the deal to Berkshire CEO Warren Buffett.

The report mentioned Sokol’s had made “misleadingly incomplete disclosures to Berkshire Hathaway senior management.” Sokol was encouraged to scout for potential acquisition opportunities for Berkshire. Last fall, Sokol met with investment bankers at Citi and requested information about companies in the chemicals industry for acquisitions. Citi sent Sokol data on 18 companies in October. “In November, Citi sent Sokol additional information concerning three of those companies, including Lubrizol. Citi’s data on Lubrizol and the other two chemical makers, which were not identified, were provided from publicly available sources, the report said. On December 13, Sokol met with Citi bankers and said the only company he found interesting was Lubrizol. Further, Sokol asked Citi to see if Lubrizol CEO James Hambrick was willing to talk about Lubrizol and Berkshire.

 The report says that the timing of Sokol’s purchases became clear to the company after a discussion between Buffett and Citi on the day the deal was announced. “A Citi representative with whom Berkshire Hathaway did business congratulated Buffett on the merger agreement, and told Buffett that Citi’s investment bankers had brought Lubrizol to Sokol’s attention,” the report says. “This was the first time Buffett heard that investment bankers played any role in introducing Lubrizol to Sokol, and did not square with Sokol’s remark in January that he had come to know Lubrizol by owning the stock.”

Since, Sokol had resigned from the company, he could not be charged with misconduct and the audit committee was considering options.

(C) WOC News



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