Sokol Knew Lubrizol Board Would Be Told of Berkshire Interest, Filing Says
Lubrizol Corp. (LZ), which agreed last month to be bought by Berkshire Hathaway Inc., expanded its disclosure to regulators to show that David Sokol purchased stock after he was told the company’s board would be notified of the takeover interest.
Sokol, the Berkshire manager who resigned last month, was told Dec. 17 by Citigroup Inc. bankers that Lubrizol Chief Executive Officer James Hambrick planned to discuss Berkshire’s interest with directors, according to a regulatory filing released late yesterday. The original filing on March 25 omitted the disclosure. Sokol bought Lubrizol stock on Dec. 14, sold it on Dec. 21 and then acquired about 96,000 shares between Jan. 5 and Jan. 7, Berkshire said on March 30.
“On December 17, 2010, Citi informed Mr. Sokol that Mr. Hambrick had indicated that he would discuss Berkshire Hathaway’s possible interest with the Board,” Lubrizol said in yesterday’s filing. The company first learned of Sokol’s stock purchases on March 30, Lubrizol said.
Sokol, 54, may have made a $3 million profit on the January purchases after Omaha, Nebraska-based Berkshire announced its takeover on March 14, according to the company’s records and data compiled by Bloomberg. The U.S. Securities and Exchange Commission is probing whether Sokol bought the shares on inside information, according to a person who declined to be identified because the investigation is secret.
Sokol told CNBC on March 31, the day after his resignation as chairman of Berkshire’s MidAmerican Energy Holdings Co., that he doesn’t believe he did anything wrong. “I was making an investment that I believe in,” according to a transcript on the station’s website. Warren Buffett, Berkshire’s chairman and CEO, said that he feels Sokol’s share purchases were legal.
Sokol purchased 2,300 shares of Lubrizol on Dec. 14 and sold them on Dec. 21, Buffett, 80, said in a statement announcing Sokol’s resignation. Sokol then bought 96,060 Lubrizol shares on Jan. 5, 6 and 7, Buffett said.
Berkshire agreed on March 14 to pay $135 a share, or about $9 billion, for Wickliffe, Ohio-based Lubrizol, compared with the closing price of $105.44 on the New York Stock Exchange in the last trading day before the announcement.
Sokol’s stake as reported by Buffett would have been worth about $9.92 million on Jan. 7, based on the closing price on the New York Stock Exchange. The shares have risen 27 percent to $134.06 since Buffett’s deal was announced, boosting the stake, if Sokol still owns it, to $12.6 million.
Sokol was also CEO of NetJets Inc., Berkshire’s luxury- flight unit. His resignation as chairman of MidAmerican is effective April 21, according to an April 1 filing. Ann Thelen, a spokeswoman for MidAmerican, didn’t respond today to a telephone message seeking comment from Sokol.
Lubrizol’s expanded regulatory filing was reported earlier today by the Wall Street Journal.
To contact the editor responsible for this story: Dan Kraut in New York at email@example.com