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The SEC investigations into the tangle of Buffett’s holdings and his and Munger’s actions at Blue Chip and Wesco dragged on through 1975. Clearly, the complexity of the Buffett investment structure had exacerbated the situation by opening them to deepening suspicion that something nefarious was going on. Buffett became increasingly determined to simplify his businesses.
Two years after the inquiry began a judgement was given: Blue Chip had set out to defeat the merger and had artificially inflated Wesco’s share price.
Despite this, no action was taken against Buffett. A promise was made not to do it again. Without any admission or denial of guilt, Blue Chip paid $115,000 to some Wesco shareholders who were supposedly hurt by the actions – in all, not much more than a slap on the wrist.
The merger
Finally, in 1978 Diversified Retail, which was by then both a retailer and a fire, casualty and workers’ compensation insurance business, was merged into Berkshire.
In return for Munger’s Diversified shares he was given a 2% stake in Berkshire and made vice chairman (he had already closed his investment partnership).
Sandy Gottesman, as one of the shareholders of Diversified, ended up with a slightly lower percentage of Berkshire than Munger.
Now Berkshire controlled Blue Chip through a majority stake (about 58%) and Buffett……..To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
