Did the heir apparent leave Berkshire Hathaway for family reasons, or did trading improprieties involving Lubrizol have something to do with it?
Bloomberg; Illustration by Ted McGrath
From the panoramic windows of his 20th-floor corporate law office, Harold J. Daub Jr., a Republican former four-term congressman and mayor of Omaha, shows the imprint his longtime friend David L. Sokol has made on their hometown. Daub points out the emerald field of the TD Ameritrade (AMTD) baseball stadium, brand-new home of the College World Series. As a board member of the municipal arena authority, "Dave Sokol did as much as any citizen of Omaha to get that beautiful thing built," Daub says. The same nonprofit board oversees the Qwest Center, where Berkshire Hathaway (BRK.A), Sokol's former employer, holds its annual meeting on Apr. 30. "Over there, that's Creighton University," Daub continues, "and that lovely red brick building is the D.J. Sokol Arena." The tidy 2,500-seat gymnasium for women's basketball and volleyball is named for Sokol's late son, who died of Hodgkin's disease in 1999, a few weeks after graduating from high school. "And Dave isn't even a Creighton alum; he's UNO"?University of Nebraska at Omaha?"and one of their big supporters, too," Daub says. "The man puts his money where his mouth is, that's for darn sure."
Putting his money behind personal convictions of a different sort has now landed Sokol in deep trouble. Until Mar. 30, he was widely seen as heir apparent to 80-year-old Warren E. Buffett, Berkshire's chief executive officer and the prophet of heartland common sense. That day, Buffett made headlines by announcing that Sokol, 54, would resign from Berkshire. On Wednesday, Apr. 27, Berkshire's audit committee again electrified the financial world. In a scathing 18-page report, it accused Sokol of violating company standards by misleading Berkshire about his personal stake in Lubrizol (LZ), a chemical manufacturer he recommended to Buffett as a takeover target. The committee stopped short of concluding that Sokol committed insider trading under federal law when he bought Lubrizol shares worth $10 million in January and then pitched the company to Buffett. But the company signaled that the former corporate star is now on his own, and Berkshire will cooperate "with any government investigations relating to this matter." The Securities and Exchange Commission is investigating, although a spokeswoman declined to comment.
Berkshire's harsh report intensifies the attention the Sokol affair has focused on the succession question at Berkshire, a company whose achievements and $205 billion market capitalization depend heavily on its reputation for "playing in the middle of the court," to use a famous Buffettism, and nowhere near the ethical boundary lines. Sokol's sudden fall has also shaken a city that takes tremendous pride in its association with Berkshire. "We're all sad, indeed," says Daub, a partner with the law firm Husch Blackwell. "It's a shock."
It's certainly not the outcome any who knew Sokol imagined for the assertive executive, who was not born to power or wealth and relied on his energy, competitiveness, and outsider's will to become the ultimate insider, Omaha-style?a prot�g� of two local business legends, builder Walter Scott Jr. and Buffett. As a member of their charmed circle, Sokol enjoyed access to opportunities unavailable to other executives. Buffett trusted him to scout multibillion-dollar investments and fix failing companies. Sokol repaid his mentor with clever deal ideas and extraordinary balance sheets.
"Dave Sokol is a real important guy around here," says Terry L. Moore, president of the Omaha Federation of Labor. Sitting at his usual breakfast table at the downtown Hilton, the AFL-CIO leader shakes his head in wonderment. He has negotiated with Sokol and done political battle against him. Despite their differences, Sokol had Moore's respect. "About the smartest business guy I know," Moore says. "We're all baffled by this?what happened, and why did it happen?"
more today news latest news more latest news latest business news latest economics news
No comments:
Post a Comment