The man widely seen as the leading successor to Warren Buffett at Berkshire Hathaway has resigned after buying shares in chemical company Lubrizol Corp before pushing Buffett to acquire it.
David Sokol’s resignation is a reputational blow for Buffett, the 80-year-old “Oracle of Omaha,” who prides himself on his folksy fair-dealing image and handpicks managers who can run businesses in a similarly transparent manner.
“Obviously Warren Buffett prides himself on transparency and this would not appear to be transparent,” said Berkshire shareholder Michael Yoshikami of YCMNET Advisors in California. “It’s surprising and always amazes me these types of events occur because it just seems so unnecessary.”
Buffett said Sokol resigned because he wanted to create a family business of his own and devote more resources to philanthropy.
Nonetheless, the sequence of events raises questions about conflicts of interest and the strength of Berkshire’s internal controls.
Buffett said on Wednesday that Sokol bought shares of Lubrizol last December, sold them, then bought more shares in early January.
Sokol presented Buffett with the idea of buying the company, and made what Buffett called a “passing remark” that he owned Lubrizol stock.
The 96,060 shares Sokol bought on January 5-7 would have generated a profit for him of at least $3.1 million based on Lubrizol’s share price over those three days and the price at which Buffett agreed to buy the company.
Sokol defended himself in an interview with Fox Business. “There was no inside information. The only reason Warren Buffett mentioned it in the release is because it would have to be brought up when Berkshire put the purchase up for a vote. It’s a disclosure issue.”