UPDATE 3-U.S. fines Berkshire over stock deal, Buffett admits mistake

Wed Aug 20, 2014 3:31pm EDT

(Adds Buffett admitting mistake)

By Jonathan Stempel

Aug 20 (Reuters) - Warren Buffett's Berkshire Hathaway Inc agreed to pay an $896,000 fine to settle U.S. government accusations that it violated antitrust rules by failing to report a transaction that boosted its stake in building products company USG Corp.

The civil penalty, which requires court approval, settles charges made on Wednesday by the U.S. Department of Justice and Federal Trade Commission that Berkshire violated the Hart-Scott-Rodino antitrust law by not telling regulators about the Dec. 9, 2013 transaction in advance.

That law requires regulatory approval for some transactions, and is designed to help protect competition. Berkshire corrected its error on Jan. 3, 2014.

"We made a mistake when we overlooked the filing requirement," Buffett, who is chairman and chief executive of Omaha, Nebraska-based Berkshire, said in a statement.

Berkshire had on Dec. 9, 2013, exchanged $243.8 million of USG convertible notes for 21.39 million common shares, giving it a roughly 28 percent stake in USG worth more than $950 million.

Regulators said that Berkshire was required to report the exchange in advance because the new stake was more than three times the minimum required, but failed to do so. Buffett said "we were late" in realizing that a report was necessary.

The transaction occurred four days after the FTC decided not to punish Berkshire for a similar "inadvertent" violation involving financial services company Symetra Financial Corp , relying on Berkshire's assurance that it would comply with Hart-Scott-Rodino.

"Although we may not seek penalties for every inadvertent error, we will enforce the rules when the same party makes additional mistakes after promises of improved oversight," Deborah Weinstein, director of the FTC bureau of competition, said in a statement.

Berkshire had been a large holder of USG stock when it bought the convertible notes in November 2008.

The notes had a 10 percent interest rate, the same rate that Berkshire got when it invested a total of $8 billion in Goldman Sachs Group Inc and General Electric Co at around the same time.

Those investments came in the wake of the financial crisis, and gave Berkshire a reputation as a lender of last resort when financial markets come under strain.

Berkshire operates more than 80 businesses and holds more than $119 billion of equity investments. The $896,000 penalty represents about a half-hour of operating earnings, based on the company's reported $15.14 billion of operating profit for 2013.

Buffett, 83, owns about one-fifth of Berkshire and according to Forbes magazine is the world's third-richest person. (Reporting by Jonathan Stempel in New York; Editing by Tom Brown, Leslie Adler and Chizu Nomiyama)

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