Buffett: Sokol's Actions Were 'Inexplicable,' 'Inexcusable'

Berkshire Hathaway Inc. (BRKA, BRKB) Chairman Warren Buffett said former executive David Sokol violated the company's insider-trading rules and code of ethics in buying shares of chemicals maker Lubrizol Corp. (LZ) before recommending that Buffett buy the company outright.

Buffett said Sokol's actions were "inexplicable" and "inexcusable," and said he was puzzled by the fact that Sokol appeared to make no effort to hide his purchases, which indicated he didn't think he was doing anything wrong.

"He essentially did it right out in the open," Buffett said Saturday at Berkshire's annual shareholders meeting in Omaha, Neb. "He was leaving a total record as to his purchases."

The comments were his first public remarks on Sokol's resignation since Buffett announced the departure a month ago.

Sokol has said his decision to resign was unrelated to his purchase of Lubrizol stock, which he bought for his personal account after asking bankers to reach out to Lubrizol's chief executive about a possible acquisition by Berkshire.

Berkshire later reached an agreement to buy Lubrizol, which boosted the value of Sokol's investment by about $3 million.

On Saturday, Buffett told shareholders that Sokol once asked that $12.5 million of compensation Buffett had earmarked to him be given to his second in command at energy company MidAmerican.

In that context, Buffett said, he found it "inexplicable" that "$3 million…would have led to the kind of troubles that it led to."

A report by the audit committee of Berkshire's board of directors, released earlier this week, said Sokol misled Berkshire executives about the timing of his stock purchases and about how he had become interested in the company.

An attorney for Sokol disputed several aspects of the audit committee report.

In announcing Sokol's resignation, Buffett had praised Sokol's work at Berkshire, and said he didn't believe his stock purchases were illegal.

-By Erik Holm, Dow Jones Newswires; 212-416-2892; [e-mail]