Warren Buffett said he cut short two telephone calls from former Berkshire Hathaway Inc. (BRK/A) manager David Sokol because he was concerned that conversations between the two could draw attention in a possible investigation.
“I said, ‘It just isn’t smart for us to be talking,’” Buffett, Berkshire’s chief executive officer, said today in a Bloomberg Television interview in Omaha, Nebraska, after the company’s annual meeting. “I said, ‘Someday they may be looking at the phone records to see if it was 15 minutes, and it’s better that it’s one minute. So we just shouldn’t talk.’”
Sokol, once seen as a candidate to succeed Buffett as CEO, resigned in March amid revelations about his stock dealings. The Securities and Exchange Commission is probing whether Sokol bought shares in Lubrizol Corp. (LZ) on inside information, a person who declined to be identified said on March 31.
Buffett, 80, said Sokol called to ask him how he was in their first phone conversation subsequent to the March 30 statement announcing the resignation. In the second call, Buffett said Sokol complained about a review into his affairs.
“He was somewhat unhappy about the degree to which the lawyers were maybe sequestering records,” Buffett said. “I said, ‘Look, I’m going to be asked about every conversation with you so the only thing to do is not talk.’”
Sokol bought about $10 million of Lubrizol shares in January while representing Berkshire in discussions about buying the engine-lubricant maker. He made a “passing remark” about a personal investment in the company while he was pushing for the takeover, Buffett said in his March 30 statement.
Buffett told shareholders that he assumed Sokol’s Lubrizol holding was bought prior to the acquisition discussions and that he regretted not seeking more information at the time. In his March 30 statement, Buffett praised Sokol for his contributions to Berkshire in more than a decade of employment and said he didn’t think he broke the law.
“I made a big mistake by not saying, ‘Well, when did you buy it?’” Buffett said. “He violated our insider-trading rules and he violated the principles I lay out every two years to our managers.”
Lubrizol jumped 28 percent on the New York Stock Exchange on March 14 when Buffett announced a $9 billion deal to buy the company. Berkshire’s audit committee said the firm should weigh suing Sokol to recover his trading profits.
“It is alarming that Mr. Buffett would be advised to so completely flip-flop and resort to transparent scapegoat-ism,” Sokol’s attorney, William Levine of Dickstein Shapiro LLP in Washington, said today in an e-mailed statement. “At no time did Mr. Sokol violate the law or any Berkshire policy. At no time did Mr. Sokol intend to personally profit at the expense of Berkshire or its shareholders. At no time did Mr. Sokol mislead or deceive.”
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