April 28 (Bloomberg) -- David Sokol violated Berkshire Hathaway Inc.’s insider-trading rules and misled the company about his personal stake in Lubrizol Corp., which he recommended as a takeover target to Chairman Warren Buffett, the firm said. An 18-page report released yesterday by Berkshire’s audit committee portrayed Buffett as a victim of deception and said the company should weigh suing Sokol, 54, to recover his trading profits.
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Berkshire will cooperate with any government investigations related to Sokol’s Lubrizol transactions and weigh suing the former manager to recover his trading profits, according to a report from Omaha, Nebraska-based Berkshire’s audit committee.
Sokol’s purchase of about $10 million in Lubrizol stock while facilitating Buffett’s deal to buy the lubricant maker “violated company policies, including Berkshire Hathaway’s Code of Business Conduct and Ethics and its insider-trading policies and procedures,” according to the report.
Buffett, 80, is facing questions about his oversight of managers and criticism for not condemning the stock trading that preceded Sokol’s resignation from Berkshire. Buffett had said March 30 in announcing Sokol’s departure that he didn’t believe the trades were unlawful.
“They’re throwing Sokol under the bus,” said Stephen Bainbridge, a professor at the UCLA School of Law who has written and taught about corporate governance.