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Thursday
Mar312011

Surprise Move: Warren Buffett's Go-to Man Resigns

Jemal Countess/Getty Images for Time Inc(OMAHA, Neb.) -- David Sokol was considered one of Warren Buffett's top lieutenants and his likely successor at investment and insurance company Berkshire Hathaway. So it came as a shock even to Buffett when Sokol submitted a letter of resignation Monday, according to a company press release.

Critics in the business media questioned Sokol's purchase of shares in Lubrizol Corp., a chemical company, before he recommended that Berkshire Hathaway buy the enterprise, although Buffett gave assurances that Sokol had done nothing "unlawful." Sokol invested millions in Lubrizol in December and January, and on March 14 Berkshire Hathaway announced its purchase of Lubrizol for $9 billion in cash. Sokol's investment value rose approximately $3 million after the purchase.

Sokol explained on CNBC Thursday morning that "knowing today what I know, what I would do differently is I just would never have mentioned it to Warren, and just made my own investment and left it alone. I think that's a disservice to Berkshire, but if that's what people want to do in the future, that's fine."

Andrew Ross Sorkin, editor of DealBook, wrote, "I have met Mr. Sokol before, found him to be an honest man and take his word that he thought he had acted completely appropriately." Though some lawyers believe the Securities and Exchange Commission will likely investigate the matter of the Lubrizol shares, the perception of the situation may matter more than its legality, said Sorkin.

Media reports questioned Sokol's actions, saying the contradicted the ethical spirit of Berkshire Hathaway.

Buffett said in a statement that he had not asked Sokol to resign, and that that the resignation came as a "total surprise" despite two previous discussions of Sokol leaving the company two years ago. In those previous discussions, Sokol gave the same reasons as in his recent letter, but Buffett and other board members "persuaded" him to stay, said Buffett.

Sokol has been a part of Buffett's empire since 2000, when Berkshire Hathaway acquired MidAmerican Energy Holdings Co., of which Sokol was chairman.

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