Pious Buffett Should Heed Own Counsel

But Buffett inconsistencies continue. One of his more risky investments has been in Level 3, whose CEO Walter Scott sits on Berkshire's board. Buffett has repeatedly criticized companies for poor disclosure, but in the second quarter Berkshire persuaded the Securities and Exchange Commission to allow the company to keep its Level 3 holdings from the public eye for a certain period.

Normally, investors with more than $100 million in stocks have to regularly file their holdings with the SEC, but a 1975 provision allows investors to request that certain holdings not be divulged if doing so would harm their investment strategies. Notably, in the second quarter, the SEC did not permit Berkshire to keep small holdings in two companies confidential.

However, it permitted confidential treatment for Level 3. Berkshire disclosed owning just $4.5 million worth of Level 3 stock in the first quarter of this year. The filing for the second quarter doesn't contain the Level 3 stake because, Berkshire says, confidential treatment was obtained. How convenient. In the quarter, Berkshire exchanged convertible securities into common stock, and received an extra slug of stock for agreeing to the conversion.

Doing the math shows Berkshire could hold around 36 million shares as a result of the conversion. Such a stake would be worth around $160 million. Buffett may own more if he also exchanged Level 3 bonds, which he is rumored to own, for common stock. Buffett is a big holder, but another very large holder of Level 3 stock, Legg Mason funds, has disclosed its second-quarter stake. So why is Buffett hiding his?

It should be clear by now: One rule for Buffett, another for the rest of corporate America.

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