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With Sokol Under the Bus, Is Buffett Home Free?

NEW YORK ( TheStreet) -- Berkshire Hathaway (BRK.B) has thrown David Sokol under the bus, but will that be enough to clear the road for the teflon CEO Warren Buffett?

Berkshire Hathaway tried to pre-empt the firestorm that Buffett is sure to face at this weekend's Berkshire annual meeting by releasing the results of a Berkshire board audit committee review that slams former Berkshire senior officer Sokol.

The audit committee report states that trades Sokol made in shares of Lubrizol weren't just a violation of Berkshire Hathaway policy and fiduciary duty, but part of a nefarious plot to fool the most revered investor of all time and his famed investment company.

The Berkshire Hathaway board described Sokol's intentions to deceive Buffett specifically about the trades, and said Sokol made misleading disclosures to Berkshire.

As the Berkshire Hathaway annual meeting approaches, Berkshire shareholders -- and the media -- have been pressing Buffett to offer some kind of statement going beyond what was said in the original Sokol press release. That release included the Buffett "line in the sand" that he would have nothing more to say on the Sokol matter in public and would simply refer all questions back to the press release.

Making the results of the Berkshire Hathaway board review of Sokol's trades public is one step to put out the fire, but the flip-flop in Buffett and Berkshire's statements about Sokol have changed so dramatically over the course of one month that many questions remain. Berkshire Hathaway also said on Wednesday that any and all questions related to Sokol that are asked at the annual meeting this weekend will be posted on the company's Web site.

Speaking to Fox News on Thursday night, Buffett said that he expects the Sokol questions to dominate the annual meeting and that shareholders should ask any and all questions, and if his lawyers try to wrestle him to the ground, he will keep on talking. It's been mud wrestling so far between Berkshire's board and Sokol's lawyer, and Buffett, in the least, has lots of explaining to do. The clean-as-a-whistle CEO who says he hates to get into altercations might yet get a little dirty, but will it be dirt on his honest Abe face or more of the fresh Berkshire mud pies being slinged at Sokol?

"How does Buffett fill the gap? It just seems weird and sort of amateurish. Don't you think there has to be more to the story for Buffett to go the way he did on March 30 and now enter a mud-slinging match? We're going to be in daily after-market entertainment mode with who's got the next press release, Sokol's lawyer or Berkshire," said Paul Howard, founder of Solstice Investment Research, and also a Bekshire Hathaway shareholder [Howard used to cover Berkshire Hathaway for Janney Montgomery].

"The fact that they are going to open it up to questions shocked me, but maybe they just want to get it all out in the open and put the issue to bed," Howard said.

Of course, how Buffett answers any questions about Sokol at the annual meeting is more important than whether his answers are posted online. Buffett may be famous as a "straight shooter," but that image is at odds, at least sometimes, with a historical record that shows a Buffett not inclined to point the finger at companies or individuals.

That's not the case with the second Sokol statement. "Buffett didn't pick on Moody's," Morningstar analyst Greggory Warren said [in fact, Buffett had to be brought by federal subpoena to testify before the Financial Crisis Inquiry Commission]. Though the analyst added that this time things were different: "Buffett has said in the past of problems at companies in which he has invested that he is just a 'passive' investor. Sokol is not a passive subordinate and the Lubrizol deal was not a passive deal.
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