Berkshire Hathaway Chairman Warren Buffett said Wednesday that one of the top executives at his company, David Sokol, has resigned from the company, soon after learning that Sokol bought stock in a company he recommended to Buffett.
Sokol said he wanted to invest to grow his family's resources in order to provide for his descendants and for philanthropic purposes.
Buffett said he was surprised to hear it, although Buffett and other members of the company's board had talked him out of it on two previous occasions about two years ago.
Buffett called Sokol's contributions to the company as a manager of various subsidiaries as being extraordinary.
Sokol first proposed to Buffett the idea of buying the Lubrizol chemical company as early as January 14. Berkshire Hathaway announced it was buying the company for $9.7 billion on March 14.
Buffett said he was not initially impressed but after Sokol told him on January 25 about a talk with Lubrizol's CEO, Buffett 'quickly warmed to the idea of buying the company.
Buffett said that when Sokol first suggested buying the company, Sokol mentioned he owned stock in the company but was not asked how much.
Five days after the announcement that Berkshire was buying Lubrizol, Buffet says he learned that on December 14, Sokol purchased 2,300 shares of the company which he sold on December 21. Then on January 5, 6 and 7, Sokol bought 96,060 shares with a $104 share price limit. That amounts to $9.99 million in stock ownership by Sokol Lurizol sold for $135 per share, or $13.0 million.
Sokol earned $3 million on his investment.
Buffett said Sokol made the purchases ahead of suggesting to Buffet that Berkshire should buy the company.
Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me they were not a factor in his decision to resign, Buffett wrote.
Buffett said Sokol's decision was a total surprise.
However on this occasion, Buffett did not attempt to talk Sokol out of his decision and accepted the resignation.
Several existing Berkshire Hathaway executives will take over Sokol's duties.
Buffett said he had held nothing back in the statement he made.