This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Sokol Serves Up Buffett for SEC: Today's Outrage

Stocks in this article: BRK.A LZ BRK.B

BOSTON ( TheStreet) -- So let me get this straight: There is a job vacancy at a prestigious investment company where I can get access to a list of potential acquisitions prepared by investment bankers, I can trade on these ideas in my personal account, and I can profit on these investments by influencing what my boss ends up buying? Where do I sign up?

It's almost as if David Sokol is daring the Securities and Exchange Commission to take a harder look at Warren Buffett and Berkshire Hathaway (BRK-B), essentially offering up the bulletproof billionaire investor on a silver platter to regulators.

And they'd be stupid not to.

In a statement late Wednesday, Buffett announced Sokol's surprise resignation, disclosing that Sokol had purchased roughly $10 million in shares of Lubrizol (LZ) before Berkshire acquired the chemicals company for $9 billion. Sokol, who had been chairman of several Berkshire subsidiaries, earned a nearly $3 million profit on the trades.

Buffett defended Sokol's purchases of Lubrizol, saying they were made before any discussions of a Lubrizol buyout were discussed. Buffett also pointed out that Sokol would have no voice in Berkshire's decision in buying the company. He even made it a point to say that Sokol's actions were not unlawful.

It doesn't appear that Sokol has the same loyalty for his former boss. Sokol became interested in Lubrizol after Citigroup (C) bankers approached him with a list of possible transactions last year, according to a regulatory filing. Sokol made personal purchases of Lubrizol before suggesting the company to Buffett.

Sokol's trades were an introductory course on how to front-run your company's portfolio. Common sense should have told Sokol to sell his stake in Lubrizol before passing the idea along to Buffett. Any other investor at a firm would have been found out and fired on the spot for front-running a portfolio.

Shockingly, Sokol doesn't seem to think what he did was improper. During a televised interview on CNBC Thursday morning, Sokol insisted he never had inside information on the Lubrizol deal and that he never expected Buffett to move as fast as he did on the deal. Given the opportunity again, Sokol claims he'd still invest in Lubrizol but he wouldn't have passed the idea along to Buffett. That's akin to admitting guilt.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs