Buffett deputy denies insider trading
After shock resignation from Berkshire Hathaway empire, David Sokol says he did nothing wrong in buying stake in Lubrizol oil company
David Sokol, once seen as the favoured successor to Warren Buffett, has rejected claims of insider trading and defended his purchase of shares in a company shortly before it was bought by the billionaire.
Speaking for the first time since his shock resignation from the Berkshire Hathaway empire was announced on Wednesday night, Sokol insisted he had behaved legally and honourably. Sokol told CNBC he had no influence over which companies Buffett invested in and that his decision to quit Berkshire was unrelated to his stake in Lubrizol.
"I don't believe I did anything wrong," Sokol told CNBC. "I made an investment that I believed in. If I didn't believe in the company, I wouldn't have invested in it."
Sokol told CNBC he had been contacted by bankers from Citigroup on 13 December last year. They suggested a number of potential acquisition targets including Lubrizol. Sokol concluded that Lubrizol was the most attractive and asked the bankers to set up a meeting between himself and chief executive James Hambrick. Sokol then attempted to buy 50,000 shares in the company, but only managed to acquire 2,300, which he sold shortly afterwards. In early January, he bought another 96,000 shares at about $104 (65) each.
According to Buffett, Sokol suggested buying Lubrizol on 14 or 15 January. The $9.7bn deal was announced on 14 March after Berkshire's $135-! per-shar e offer was accepted, giving Sokol a paper profit of almost $3m.
Sokol acknowledged the Lubrizol stake did raise questions. "I can understand the appearance issue and that's why we decided to make it public." he said. The stake would eventually have been revealed under regulatory filings.
During the TV interview, which was eagerly watched on Wall Street and in the City, Sokol explained he had no influence over whether Buffett's Berkshire Hathaway would decide to bid for a company.
"I don't think there was any impropriety," he insisted. "I didn't have any inside information.
"The reality is that I didn't think there was a 5% chance of Warren being interested in the company."
Sokol, who chaired several Berkshire subsidiaries, including the corporate airline NetJets, said he had not been contacted by the Securities and Exchange Commission over his share dealings. He also told CNBC that Charlie Munger, another of Buffett's top lieutenants, had owned 3% of Chinese carmaker BYD before asking Sokol to examine teaming up with it. Berkshire bought 10% of BYD in September 2008.
Questioned about the timing of his departure, Sokol said the team at NetJets could run the airline without him and that, by departing now, it would help the usual discussions about Buffett's succession at Berkshire's annual meeting at the end of April.
Looking ahead, Sokol said he was keen to set up and run his own fund. He was also ebullient in his praise for the company he is leaving behind. "No disrespect to Warren or Berkshire frankly, I love both of them," he said.
Sokol was also sufficiently relaxed to conclude the interview by wishing his granddaughter Lucy a happy birthday.
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