Buffett admits error, says Sokol events inexcusable

OMAHA, Nebraska Sat Apr 30, 2011 7:38pm EDT

1 of 14. Berkshire Hathaway Chairman Warren Buffett wanders the company trade show before his company's annual meeting in Omaha, Nebraska April 30, 2011.

Credit: Reuters/Rick Wilking

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OMAHA, Nebraska (Reuters) - Warren Buffett said he was wrong not to press David Sokol about purchases of Lubrizol Corp stock while his former top lieutenant was pitching the chemicals company as a possible takeover target for Berkshire Hathaway Inc.

It was the kind of answer investors had clamored to hear from Buffett at this year's Berkshire annual meeting, ordinarily a lovefest for tens of thousands of shareholders, and over which the Sokol episode had cast a cloud.

Buffett said Sokol had violated Berkshire insider trading rules by failing to disclose his January purchase of Lubrizol shares, less than four weeks after starting talks with Citigroup Inc bankers about the company.

Sokol, who chaired Berkshire's MidAmerican Energy unit, ran its NetJets plane leasing unit, and was a top Buffett deal maker, was considered a leading contender to succeed 80-year-old Buffett as Berkshire's chief executive.

But he resigned last month when his Lubrizol stake was revealed. Sokol got a $3 million profit on that stake when Berkshire agreed to buy Lubrizol for about $9 billion.

The U.S. Securities and Exchange Commission is probing Sokol, a person familiar with the matter has said. The controversy has called Buffett's management into question.

"I obviously made a big mistake by not saying, 'Well when did you buy it?'" Buffett said on Saturday, as he and Vice Chairman Charlie Munger fielded shareholder questions for five hours from the stage of the Qwest Center in Omaha, Nebraska.

Calling the Sokol situation "inexplicable and inexcusable," Buffett used the same language he had used 20 years ago to describe the failure by management at Salomon Brothers Inc, which he chaired, to tell regulators of wrongdoing tied to a Treasury bidding scandal.

He later told Reuters Insider his much-criticized March 30 press release announcing Sokol's resignation had been "inept".

Berkshire Class A shares closed Friday at $124,750, and its Class B shares closed at $83.30. Both groups were well represented at the meeting.