October 25, 2021

DealBook: S.E.C. Ends Scrutiny of Former Top Aide to Buffett

David Sokol was once chairman of MidAmerican Holdings, a part of Berkshire Hathaway.Lucas Jackson/ReutersDavid Sokol was once chairman of MidAmerican Holdings, a part of Berkshire Hathaway.

The Securities and Exchange Commission has decided not to file insider trading charges against David L. Sokol, a onetime top lieutenant at Berkshire Hathaway, Mr. Sokol’s lawyer said Thursday.

Mr. Sokol came under scrutiny in 2011 after abruptly resigning as chairman of Berkshire’s MidAmerican Energy Holdings, one of the many holdings of the investment conglomerate run by the billionaire Warren E. Buffett. At the time, Berkshire revealed that Mr. Sokol bought shares in Lubrizol, a maker of lubricants that he wanted Mr. Buffett to buy. Mr. Sokol bought the shares about two months before Berkshire announced a $9 billion acquisition of the company. After the deal was announced, the value of his Lubrizol stake rose by $3 million.

But Mr. Sokol’s lawyer, Barry Wm. Levine, said that the S.E.C. informed his client on Thursday that it had completed its inquiry and decided not to pursue a civil enforcement action.

Mr. Levine said he was happy that his client was “exonerated” and that Mr. Sokol never acted improperly in the trades. “He is the paragon of rectitude,” said Mr. Levine, a partner at the law firm Dickstein Shapiro in Washington.

John Nester, a spokesman for the S.E.C., declined to comment on Thursday. The agency typically does not comment when it decides not to pursue action in such cases. The news was first reported online by The Wall Street Journal.

Mr. Sokol’s resignation in 2011 was a rare black eye for Berkshire. A star manager, Mr. Sokol had run several Berkshire subsidiaries, including MidAmerican Energy and NetJets, which sells fractional ownerships of private jets. He was long considered to be a leading candidate to succeed Mr. Buffett, 82.

Mr. Sokol, now 56, had also become a crucial player in the conglomerate’s frequent deal-making, earning the nickname “Mr. Fix-it.” He served as a point man for Mr. Buffett on a number of potential transactions, particularly during the financial crisis.

His sudden resignation caught Berkshire by surprise. Mr. Buffett said he did not ask for Mr. Sokol’s resignation, suggesting at the time that it was a personal decision by Mr. Sokol.

Mr. Buffett initially defended his protégé’s trading. “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful,” Mr. Buffett said at the time.

But additional information surfaced after the Berkshire board investigated Mr. Sokol’s trading record. Berkshire directors ultimately accused Mr. Sokol of misleading the company about his personal stake in Lubrizol.

Mr. Sokol bought $10 million worth of stock in Lubrizol shortly before bringing the company to Mr. Buffett’s attention, according to the board. While Mr. Sokol made a “passing remark” to Mr. Buffett about his trading, the board said that Mr. Sokol did not tell Mr. Buffett that he had bought his stake in Lubrizol after Citigroup bankers had pitched the company as a potential takeover target. He also bought some of the shares, according to the Berkshire directors, after learning that Lubrizol might entertain a takeover offer.

“His misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor he owed the company,” the board’s report in 2011 says. It adds that Mr. Sokol may have failed his fiduciary duty under the law of Delaware, where Berkshire is incorporated.

At the time, Mr. Levine said that Mr. Sokol was considering a personal investment in Lubrizol since summer 2010, before meeting with bankers to discuss the company as a potential takeover target.

Still, Mr. Buffett said the trades violated company trading policy and called Mr. Sokol’s actions “inexplicable and inexcusable.”

He also provided testimony to S.E.C. investigators. Meanwhile, Berkshire continued to pay Mr. Sokol’s legal bills. Last spring, Mr. Buffett claimed those bills reached nearly $200,000 a month.

Mr. Buffett could not be immediately reached for comment on Thursday night.

But later in 2012, S.E.C. lawyers decided that there was insufficient evidence to mount a case against Mr. Sokol. The evidence was circumstantial, S.E.C. officials concluded, and it was unclear whether Mr. Sokol had a true window into the Lubrizol deal-making process. He also had no indication at the time of his stock trades that Mr. Buffett would be interested in acquiring the company.

Since resigning from Berkshire, Mr. Sokol has been managing his own portfolio, Mr. Levine said.

Pradnya Joshi contributed reporting.


This post has been revised to reflect the following correction:

Correction: January 4, 2013

A summary with an earlier version of this post misspelled the surname of the billionaire investor. He is Warren E. Buffett, not Bufett.

Article source: http://dealbook.nytimes.com/2013/01/03/s-e-c-ends-scrutiny-of-former-top-aide-to-buffett/?partner=rss&emc=rss

Easing Out the Gray-Haired. Or Not.

Nothing, he said, is as tough as telling fellow partners that their best days are behind them. “I’ve always joked that I wish I could have these conversations by phone,” Mr. Levine said. “If someone wants to stay and you don’t want them to, that’s the hardest. It’s like going to your parents and telling them they can’t handle their affairs anymore.”

If anyone doubts the sensitivity of the task, consider the case of Jorge Posada, the once-formidable New York Yankee who at the ripe old age of 39 found himself demoted in the starting lineup, unable to consistently do the one thing a designated hitter does — hit. When he got the news earlier this month, he walked into manager Joe Girardi’s office an hour before the game was to start and announced he wasn’t going to play.

Few professionals in other fields have that option — Posada’s contract guarantees him $13.1 million this year, despite a batting average of .183, the lowest among designated hitters in Major League Baseball. But the painful encounter between coach and lagging star — Posada apologized the next day — is one that is taking place with increasing frequency in the wood-paneled aeries of law firms, banks and other elite professions, industry insiders said.

“All the rules have changed,” said a longtime New York executive recruiter, Richard Stein of Caldwell Partners. “In a market that’s become extremely lean and mean, these individuals who have tended to be the senior statesmen of their day are sometimes the first to go.”

It can happen at any age, of course, but it’s an especially delicate issue in an era when many workers stay on after they turn 66, when they qualify for full Social Security benefits.

Even as old notions of professional courtesy and obligation erode, so too has the quiet acceptance of traditional, mandatory retirement ages. Twice in recent years the Equal Employment Opportunity Commission has sued top law firms, accusing them of discriminating against older partners, and a closely watched case now under way could make it even harder for firms to dislodge aging lions.

As roughly 44 million baby boomers hit retirement age over the next decade, the problem of how and when to step aside is becoming a hot-button issue, said Robert J. Gordon, a professor of economics at Northwestern University. Many older workers have had to put off retirement because of stock market losses during the recent deep recession. And while unemployment among older workers is lower than the national average at 6.2 percent, it is up sharply from three years ago, when it stood at 2.9 percent.

Some jobs will always have age restrictions — police officers, firefighters, air traffic controllers and the like. And in corporate America, mandatory retirement ages for senior management face less resistance, thanks in part to generous incentives to leave early that are perfectly legal. What is more, federal law permits age limits for the top brass who set corporate policy.

But chief executives still have a habit of hanging on, said Jeffrey A. Sonnenfeld, a professor at the Yale School of Management and the author of a book on the subject, “The Hero’s Farewell.” Mr. Sonnenfeld has even developed a taxonomy to describe how different executives handle the challenge of going into the sunset.

The monarchs stamp out rivals and remain on the throne until they die or are forced out, while the ambassadors become senior statesmen, attending the economic forum at Davos, Switzerland, and similar affairs. Generals leave under pressure and spend their days plotting a Napoleonic return to power. Finally, there are the governors, who go on to do something else, like philanthropy or public service.

Rupert Murdoch at the News Corporation and Sumner M. Redstone at Viacom are quintessential monarchs, but Andrew S. Grove has became an ambassador for Intel, Mr. Sonnenfeld said. Steven P. Jobs is a general at Apple, and Henry M. Paulson Jr., formerly of Goldman Sachs, has emerged as a governor with his tenure as Treasury secretary under President George W. Bush.

On Wall Street, firms like Goldman don’t have a mandatory retirement age, but there are other ways of easing people out, like “de-partnering,” when partners are quietly dropped from the top ranks.

It is an especially tough issue in the legal profession. There is no mandatory retirement age for federal judges — one remains on the bench at 103 — and solo practitioners often work into their 70s and 80s. Senior partners at big law firms, on the other hand, frequently feel the heat much sooner.

“It’s a huge issue with law firms amid the downturn,” said Jonathan Ben-Asher, an employment lawyer in New York. “Partners may be eased out or chucked out, but in my experience, it is much harder for older partners to maintain their position if their billable hours decline. They’re not given the same courtesies or deference there was in years past because there is less money to go around.”

Article source: http://feeds.nytimes.com/click.phdo?i=6191c0192741332cf47328562eba7be8

DealBook: Berkshire Fires Back Against Sokol’s Lawyer

Berkshire Hathaway has escalated its war of words with its former executive, David L. Sokol, who resigned last month after buying shares in a specialty chemicals manufacturer while orchestrating a potential takeover of the company.

A Berkshire director and lawyer, Ronald L. Olson, released a statement on Wednesday night saying that the company’s board had sought to interview Mr. Sokol about his $10 million stake in Lubrizol, contradicting earlier remarks made by Mr. Sokol’s lawyer.

Mr. Sokol declined that interview request, Mr. Olson said.

On Wednesday afternoon, the board released a scathing report accusing Mr. Sokol of misleading Berkshire about his Lubrizol trades and violating the company’s ethics and insider trading policies.

Mr. Sokol, once seen as a leading contender to succeed Warren E. Buffett atop the Berkshire empire, never told Mr. Buffett that he had bought his stake in Lubrizol after Citigroup bankers had pitched the company as a potential takeover target, the report said.

In response, Mr. Sokol’s lawyer complained that the directors had failed to question his client, the former chairman of MidAmerican Energy and NetJets, for the report.

“I am profoundly disappointed that the audit committee of Berkshire Hathaway would authorize the issuance of its report to the public without the care and decency to ask even a single question of Mr. Sokol,” said the lawyer, Barry W. Levine, of Dickstein Shapiro.

A few hours later on Wednesday, Mr. Olson disputed Mr. Levine’s statement.

“Mr. Sokol was interviewed at least three times regarding his Lubrizol trading activity and contacts with Citi bankers,” Mr. Olson, a partner at Munger Tolles Olson, said in the statement. “In connection with the preparation of the audit committee report, a request for a further interview with Mr. Sokol was made to his attorney. Mr. Sokol was not made available.”

Munger Tolles Olson, Berkshire’s longtime outside law firm, helped prepare the audit committee report, which was presented to Berkshire’s board on Tuesday night.

Mr. Levine did not immediately return a request for comment on Thursday.

On Wednesday, Mr. Levine disputed the audit committee report, saying that Mr. Sokol’s trading was above board. Mr. Sokol, his lawyer said, had been considering a personal investment in Lubrizol since summer 2010, before meeting with Citigroup in December to discuss the company.

Mr. Sokol, 54, resigned from Berkshire Hathaway after it emerged that he had personally bought about 100,000 Lubrizol shares shortly before bringing the company to Mr. Buffett’s attention in January. Berkshire later agreed to buy Lubrizol for $9 billion, causing Lubrizol’s shares to surge and increasing the value of Mr. Sokol’s holding by about $3 million.

Article source: http://feeds.nytimes.com/click.phdo?i=9eb3d26f3585d38748ab54abc4b5497b