Sokol leaves Berkshire amid Lubrizol stock row

David Sokol, once a candidate to succeed Warren Buffett as the head of Berkshire Hathaway, resigned as it was disclosed he helped negotiate a takeover while buying stock in the target company.

Sokol, 54, bought about 96,000 Lubrizol Corp shares in January before recommending the company as a takeover target, Buffett, Berkshire’s chairman and chief executive officer, said yesterday in a statement. Sokol had initiated confidential talks with Lubrizol the month before. Berkshire agreed to buy the firm for $9 billion on March 14.

Buffett, 80, has relied on Sokol as a manager and a dealmaker for more than a decade. The billionaire, who’s been planning his succession, is awaiting approval from regulators and shareholders for the Lubrizol deal. Enforcement lawyers at the US Securities and Exchange Commission (SEC) were reviewing Buffett’s statement and discussing the matter internally, according to one person with knowledge of the talks.

“The SEC is going look at that deal to check for insider buying and selling, so if there’s an issue the time to clean it up is now,” said Daniel Genter, president of RNC Genter Capital Management in Los Angeles, which oversees about $3.7 billion.

Berkshire Class B shares fell 3 per cent to $82.90 in extended trading in New York after the announcement, and have risen about 6.7 per cent this year. Sokol was chairman of Berkshire’s MidAmerican Energy Holdings and its roofing unit Johns Manville. He was also CEO of NetJets, Berkshire’s luxury-flight subsidiary.

SHARE PURCHASES
Sokol bought 96,060 Lubrizol shares on January 5, 6 and 7, less than two weeks before proposing that Berkshire buy the company, Buffett said. The purchases may have given him a profit of about $3 million, according to Buffett’s disclosure and Bloomberg calculations. Sokol’s compensation from MidAmerican totalled $59.5 million in the last five years, according to the unit’s SEC filings.