December 11, 2017

David Sokol Resigns From Berkshire Hathaway; Is SEC Insider Trading Probe Coming?

David Sokol has resigned from his position as CEO of Netjets and Chairman of MidAmerican Energy Holdings Company according to a Berkshire Hathaway press release dated March 30, 2011, where was on the short list for possible successors to Warren Buffet at Berkshire Hathaway (Stock quote: BRK.A and BRK.B), believed by many to be the smartest investor in the world.


David Sokol resigns from Netjets, a Berkshire Hathaway subsidiary, over Lubrizol stock purchases, which many are wondering might become part of a SEC insider trading investigation.

David Sokol resigns from Netjets, a Berkshire Hathaway subsidiary, over Lubrizol stock purchases, which many are wondering might become part of a SEC insider trading investigation.

Berkshire Hathaway has a 100% ownership stake in Netjets and a 89.8% stake in MidAmerican Energy Holdings Company.

Sokol gave personal career reasons for tendering his resignation, but also disclosed his stock purchases in Lubrizol (Stock ticker: LZ), a specialty chemical company that Berkshire Hathaway has recently announced a $9 billion agreement to purchase the company.  Mr. Sokol purchased shares in Lubrizol ahead of the Berskshire Hathaway announcement of the purchase.

While both David Sokol and Warren Buffet state that they believe that Mr. Sokol’s Lubrizol stock purchases were legal, many financial news reporters and commentators are wondering if Mr. Sokol’s trades would be considered as front-running, or insider trading – and also are asking whether a SEC investigation may be forthcoming.  In his appearance on CNBC’s Squawk Box on March 31, Mr. Sokol said that he had not been contacted by the SEC.

The Wall Street Journal has published a detailed timeline of events surrounding Sokol’s Lubrizol stock purchase in the context of Berkshire Hathaway’s announcement of purchasing the company.

Here is the SEC Schedule 14a Preliminary Proxy Statement filed by Berkshire Hathaway regarding the Lubrizol announcement.

David Sokol has tried to resign from his positions at the Berkshire Hathaway owned companies in the past, but his resignation was not accepted by Berkshire Hathaway.

UPDATE:

Further analysis from around the blogosphere on whether Sokol’s trade in Lubrizol constitutes insider trading:

Kid Dynamite’s World

David Merkel

NY Times Dealbook


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