Berkshire to Pay $896,000 to Settle U.S. Lawsuit Over USG

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) agreed to pay $896,000 to settle U.S. claims that it violated antitrust laws when it acquired USG Corp. (USG) stock without reporting the transaction, after getting an earlier pass from regulators for the same infraction.

Berkshire failed to notify federal regulators about converting USG notes into stock in December, the Justice Department and the Federal Trade Commission said today. The reporting requirement covers transactions over a certain threshold so the government can evaluate whether competition will be hurt.

“The commission requires compliance with the premerger notification rules and will not hesitate to seek civil penalties against companies or individuals that fall short of their filing responsibilities,” Deborah Feinstein, the director of the FTC’s bureau of competition, said in a statement.

The settlement, which resolves a U.S. lawsuit filed against Berkshire in federal court today, stems from the company’s investment in USG, a Chicago-based maker of building materials. Berkshire in November 2008 purchased $300 million of USG convertible notes, which were turned into stock on Dec. 9 last year.

Made Mistake

Buffett, the chairman of Berkshire, said the company “made a mistake.” Berkshire is the largest shareholder of USG, with a 30 percent stake, according to data compiled by Bloomberg.

“Berkshire had owned convertible notes of USG since 2008 and was effectively forced to convert the notes when they were called for redemption by USG in December 2013,” Buffett said in a statement. “This event triggered a filing requirement for Berkshire, and we were late in realizing that fact.”

In January, Berkshire made a corrective filing and acknowledged the acquisition should have been reported, according to the Justice Department’s complaint. The Omaha-based company was in “continuous violation” of federal law from Dec. 9 through Feb. 3, the government said.

Berkshire’s failure to notify regulators prior to the USG investment came about five months after it neglected to report a $41 million investment in Symetra Financial Corp. (SYA)

Berkshire said at the time that its failure to file and observe a waiting period was “inadvertent,” according to the Justice Department’s complaint. The FTC took no action against the company, and Berkshire said it would implement monitoring procedures, the commission said.

The case is U.S. v. Berkshire Hathaway Inc., 14-01420, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Sara Forden at sforden@bloomberg.net Joe Schneider, Andrew Dunn

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