Buffett's right-hand man under fire

David Sokol, the man who had been expected to succeed Warren Buffett as head of Berkshire Hathaway, has insisted he did nothing illegal or unethical by buying shares in a chemicals company before recom-mending that the billionaire investor make a takeover bid.

Sokol's public defence of his share trading came less than a day after Buffett stunned Berkshire shareholders by announcing Sokol's resignation and revealing that the executive stands to make a US$3 million ($3.95 million) profit from his three-month investment in Lubrizol shares.

Berkshire announced the US$9 billion takeover of Lubrizol, one of the largest acquisitions in the conglomerate's history, last month.

Sokol's purchases of shares in Lubrizol began on December 14 last year, the day after he picked the company from a list of potential bid targets drawn up by Berkshire's bankers at Citigroup. Early in the new year, Sokol went to Buffett to suggest he explore a bid.

"I don't believe I did anything wrong," Sokol said this week. The purchases of Lubrizol shares did not amount to insider trading because takeover decisions rest not with him but with Buffett and Berkshire's board, which he is not a member of.

"The thing people need to understand is I've never had any authority at Berkshire to invest a dollar in stocks ... I didn't have any inside information. I made the decision to buy the shares because I thought it would be a good investment for my family and I would do it again tomorrow."

Sokol has decided to leave Berkshire after more than a decade running several of its most important subsidiaries, a decision he and Buffett say was separate from the share trading revelations.

Sokol is hoping to start a "mini-Berkshire" to make his family and their descendants rich.

He said neither his billionaire boss nor the board had spoken to him about the timing of his purchases in Lubrizol, which he disclosed to them two weeks ago. Sokol told Buffett he had shares when he first brought Lubrizol to his attention, but was not asked how many or when he bought them.

Buffett, who turned 80 last year, has always said he has no plans to retire but has a "just-in-case" succession plan. It involves splitting his role into two - a chief executive job that had been expected to fall to Sokol and an investment manager post. Sokol said he did not know if he was a successor.

The executive also said Buffett had twice talked him out of leaving the company but made no attempt to do so when he tendered his resignation this week.

"The timing was right" to leave, Sokol said, after the Lubrizol deal was agreed and before Berkshire shareholders gather for their annual meeting in Omaha next month.

Sokol said Berkshire had in the past acquired companies in which its managers had some shares and it would have been a "disservice" to Berkshire not to have suggested Lubrizol as a target, just to avoid the appearance of impropriety.

However, he conceded it was clear to Citigroup that he was working on Berkshire's behalf when he ordered a list of "possible transactions in several industries" last year - as disclosed in a recent SEC filing.

- Independent