by Charlie Gasparino Info
Charlie Gasparino is a senior correspondent for Fox Business Network. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His latest book, Bought and Paid For, is about the Obama administration and Wall Street.
As reputations go, Warren Buffett’s was Teflon. Charlie Gasparino on how his deputy’s strange trading profits reveal the Oracle of Omaha as—gasp!—another overambitious businessman.
The Securities and Exchange Commission is now “kicking the tires” on the bizarre news that David Sokol, Warren Buffett’s heir apparent to run Berkshire Hathaway—a guy who manages two large companies for Buffett, among many other duties—has a little job on the side in trading large blocks of stock, including shares in one company he helped convince Buffett to buy.
This may or may not lead to a full blown investigation (even if it does, I can’t imagine anyone being charged) but it should lead to a full blown reassessment of Warren Buffett as Wall Street’s white knight.
Sokol's resignation is less baffling than Buffett’s PR spin last night: “Dave’s purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea.” In other words, Buffett’s defense is that the man he was grooming to take over was so clueless that he had no idea how he’d react.
“Neither Dave nor I feel his Lubrizol purchases were in any way unlawful,” Buffett continued in the memo. “He has told me that they were not a factor in his decision to resign,” and that somewhere along the way “in a passing remark” Sokol did his corporate duty and faithfully disclosed he had owned shares in a company that is now part of the Buffett empire, thus profiting handsomely from his trade.
Since when did a passing remark constitute proper disclosure of such a large, and as it turns out, controversial trade?
I can’t tell you whether all of this constitutes insider trading or some other violation of the federal securities laws such as “front running” (where traders take positions in stocks in advance of someone else buying the stock). The SEC will decide, I am told, shortly whether to add Sokol’s trade to its burgeoning list of official cases that never seems to end.
Buffett’s defense is that the man he was grooming to take over was so clueless that he had no idea how he’d react.
Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., during a news conference in New Delhi, India, on Thursday, March 24, 2011. Inset: David Sokol (Photo Credit: Getty Images; AP Photo)
But I can tell you that this entire episode shows why investors and the media should stop portraying Warren Buffett as a saint, who never lies, cheats or equivocates and surrounds himself with similar heavenly characters. Instead, Buffett should be seem for what he is: A great investor and businessman motivated by greed and ambition and like his unheavenly deputy.
If this weren’t Warren Buffett, the immediate fallout would be greater. Consider the following: Sokol bought 2,300 shares of a stock in a company called Lubrizol in mid-December 2010, sold it a week later, then made a massive bet by snapping up close to 100,000 shares in early January when the company was trading around $110 a pop. That’s an $11 million position, which is huge even for the most sophisticated individual investor.
Like I said, Sokol also runs two companies for Buffett, MidAmerican Energy Holdings and NetJets Inc., so you have to wonder where he has all the time to moonlight as a day trader. You also have to wonder why he would buy a $110 stock in a chemical company that seemed to be fully priced; shares of Lubrizol had risen from about $80 that summer and looked to be stuck in the $100-$110 range. In other words, Sokol was taking a huge gamble.
But gambling as a day trader could in theory produce some easy money if you have the ability to prod one of the world’s most prestigious investors to buy one of your holdings.
That’s exactly what Sokol did. A week later, he told Buffett that he thought Berkshire should buy Lubrizol, makes that little passing remark about owning shares, and the rest is history. In mid March, Berkshire buys Lubrizol, and the stock rises to around $135 a share, and in a little more than two months, Sokol “earned” between $2.5 million and $3 million.
Buffett’s halo has been dimming for some time. He tried to downplay the role that rating agencies played in missing the financial crisis while he owned a chunk of one of the biggest raters, Moody’s Investors Service. He stood behind Goldman Sachs CEO Lloyd Blankfein despite general sleaze at the firm, while he boasted that he was earning $15 a minute, on his ownership stake in Goldman.
In last night’s memo, which spun the the notion that Sokol wasn’t really booted from the firm, Buffett said that he and his longtime No. 2, Charlie Munger, make all the investing decisions. “(Sokol) he knew he would have no voice in Berkshire’s decision once he suggested the idea; it would be up to me and Charlie Munger, subject to ratification by the Berkshire Board of which Dave is not a member,” Buffett wrote, before closing with the line: “I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release.”
Not even St. Warren will get away with that line if the SEC asks him to explain these troubling circumstances in more detail.
Charlie Gasparino is a senior correspondent for Fox Business Network. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His latest book, Bought and Paid For, is about the Obama administration and Wall Street.
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America loves its mythical heroes. It's childlike and fairly predictable. Only those not in the financial industry bought into his sainthood.
I think it is a cheap shot to try to blame Buffett for the rating agencies part in the C.D.O. explosion. He was I believe a 15% owner of a common stock. He did not run the company. Prior to 2007 he used to bitch for years about how options,derivatives etc were weapons of financial mass destruction. He did this in his yearly letter to shareholders. He did have a reason for all his complaining, he bought General Re and got stuck with its derivatives department which no one would buy from him. With this failure he learned everything he could about the biz and was terrified when he understood it. Also what sets him apart is that he makes something like $200,000 in salary to run his company. In this day and age when CEO's are paid $40 million even if the company goes bankrupt I think it is a steal. Also most CEO's never have any of their own real money in the game, just the shareholders,not Buffett. Oh yeah he's giving all of his dough away and forcing the trust to spend it all in (10 years?), so it does not become a bloated charity. Nuff said The world could do a lot better if all CEO's were this bad.
There is nothing "cheap" in holding a person accountable. All people manage their persona, people with money have to do it more. This supposed oracle guy is nothing more than an opportunist, and a savy manipulator. As well, you stand to be corrected, his protestations to the contrary, buffet has made considerable bank over the years dealing in derivative product. Wow, you really need to study the subject before commenting.
Thank you milles27. Agree completely with you. Charlie Gasbaggarino, as usual, is full of crapparino. The Oracle of Omaho is not superman, nor is he prescient. He is the prototype of what we used to think of as the "Investor", back before all of this horsebaloney derivative, smoke and mirrors, cdo/cdf bullpucky was created. That Warren Buffett takes the high road, the smart road, the one least likely to lead to litigation over wrongful termination, slander, or disparagement by this Sokol joker, shows that Buffett makes his decisions based on good common sense. But I bet he is still smarting over the five billion dollars he infused into Goldman Sachs, only to watch in amazement a year later as John Paulson siphoned off a smooth five billion dollar annual bonus for his outstanding work in the derivatives/creative products division of the wild wild west.
If you lie down with a dog like Obama you are bound to get fleas.
Ha! This is the most typical drivel posted by a certain member of the hoi polloi.
You would surely guess that Buffett was a Republican instead of a Demo when you read this article because we know the Repubs believe in steal from the poor and Middleclass and give to the rich!!!
And you would be wrong. So goes another liberal myth.
ahhh, Dale. so that is why cheney, Rice, Rumsfeld, Koch Brothers, Coors, Mellon Schaife, Murdoch are always itching like crazy !!! Halliburton? Blackwater? etc? Like to know WHERE you see Obama doing any shady deals. The Culture of corruption was the Republican Wall of Shame! How about Abramoff, Cunningham, Delay and the rest of the boyz? give us a break on casting stones, little man, you have too many glass houses of your own!!!
comment is off point. what part does the current administration play in this article?
RE: "He didn't know what he wanted, but he knew he wanted MORE." ="Henderson the Rain King," Saul Bellow [1959] This sordid episode is revealing in so many ways; most of all, perhaps, in its exposure of the unrestrained nature of greed in American business today. =Specifically, I'm sure Buffet's #2 man, and "heir-apparent," was making tons of money; but, of course, it wasn't enough. To make what amounted to a relatively few "extra bucks," Sokol risked his future, his reputation and, possibly, a jail sentence for "insider trading." =As if we needed it, here's another example of why strong government oversight of these characters and their domain is required.
Gas'bag'arino would write a hit piece on his own mother just to get face time; he's a hack and this piece just proves it. Buffett's halo isn't tarnished at all, regardless of Moody's holdings and Charlie's want to hang the financial crash and disaster on him. Obviously Charlie never paid attention to Bufffett's want to have regulation and clean up done in the past - or Charlie conveniently forgets that in order to puke out this filthy piece. Try again, Charlie - your bashing here is only designed to stir up the carny barkers who believe anything puked out by someone on the Faux networks.
A truly uninspiring and insipid riposte; bereft of any form of cogency and or factual argument. Way to go sport!
There are no saints in the world of finance.
Berkshire owns Kirby Vacuums. Buffett as its major owner has personally benefited every time a sleazy door-to-door salesman sold an overpriced Kirby vacuum to a low income sucker. ABC once did an expose of Kirby but -- surprise! -- the Buffett ownership was never mentioned.
money paves and covers everything for those with the billions, now doesn't it??
"Greed is good." It's what makes capitalism work.
Just remember one things, folks-----One of the ONLY billionaires who was out there saying he should pay more taxes, that his tax RATE was less than his secretary, who was part of that group of Billionaires who signed the letter to Obama that he should do away with Bush's tax cuts to the wealthy was no other than BUFFETT !!!! Didn't see one single Repug name on that list. The Koch brothers want every dime they can suck off the public tit!!!
Warren Buffet will always be respected and liked, regardless of what turns up. He played in a muddy arena; he is bound to have some mud on him. Bill Gates played in a muddy arena; he is bound to have some mud on him. When Jesus carried his cross here on earth, he fell three times. Who among us could fall less when we carry our cross? Everyone on earth is carrying a cross of some kind even though they may look like they are on cloud 9. Even though there is a little gangster in all of us, we still must up hold the laws and legislate more to keep the world from spinning out of acceptance. A little mud on any of us is always better than drowning in quicksand.
The very sound of Warren Buffet's name leaves a sour note in my brain. His goons hounded me for five years under the name of Geico. His client rear-ended me FOUR, yes 4 times, which has caused untold grief and agony for me ever since it happened. After five years of lies, double speak from lawyers and more lies and phony doctors, in phony offices, I finally gave it up. I HOPE he gets investigated. All I can say is he is NOT a hero in my books. I see nothing honorable about him.
Shoot them all like running dogs and go back to a subsistence economy so we can all see how much meat the other has...
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