Buffett's aide trades pressure

A short phone call with a top manager has one of the most sensitive positions landed in his 60-year career of billionaire investor Warren Buffett.

David Sokol, once a leading contender for Mr. Buffett as Chief Executive of Berkshire Hathaway Inc., successfully Mr Buffett called mid January, suggesting that Berkshire buy chemical company Lubrizol Corporation, and Mr. Buffett said that he personally shares of the company owned.

Bloomberg News Berkshire Hathaway Vice Chairman Charlie Munger, links, and Chairman Warren Buffett at a press event in China last year. Buffett consulted his long-time colleague on the stock trades by Berkshire David Sokol.

Berkshire agreed later Lubrizol, a 3 million dollar profit in Mr Sokol trading position raise. Berkshire has not Mr Sokol expose position until he finished this week, saying that he wanted to invest money in the center of his family.

Now, the Securities and Exchange Commission - which had already been examining trade in the Lubrizol deal - is likely an investigation about the events surrounding Mr Sokol start of floor trading and the Lubrizol deal, a person with the matter says familiar.

Berkshire class B shares fell $1.83 or 2.1% to $83.63 on Thursday.

Discuss the three candidates at the Berkshire Hathaway Liam Pleven and Bob O'Brien, are Warren Buffett that leader David Sokol resigned in the race, now, to replace. Plus, what are the features in Buffett successor needed?

In a statement on Wednesday, Mr Buffett said that he and Mr. Sokol not the Lubrizol believe purchases were "against the law in any way", and his resignation was not relating to this issue. Mr Buffett has declined further comment.

Longtime Berkshire shareholder, the Frank Betz of car secret Zane capital management says that he believes the incident was a blip. "It was a stupid bear, but I'm sure it was unintentional."

However, the incident for Mr Buffett could prove nettlesome. His is the most famous sayings: "It takes 20 years for a reputation and five minutes to destroy it." He said in his statement Wednesday, that he Mr Sokol for more information about the business issues, not when the issue first came.

Mr Sokol, Chairman of Berskshire holdings had been unit MidAmerican Energy, said in a CNBC television appearance Thursday: "I don't think I have anything wrong or unethical," added that he "tomorrow would do it again."

He added that leaders of the Berkshire should units invest in "company Berkshire has no knowledge of," on the purchase by Berkshire Vice Chairman Charlie Munger of the shares of Chinese automaker BYD co. Ltd., before some years ago, Berkshire invested in the company.

Mr. Munger, however BYD shares for years before his children Berkshire investment bought and held the talks than Mr Buffett invests in recital draws, it is close to the situation. Mr. Munger refused, Mr. Sokol BYD comment on comments.

Mr Sokol said he first Lubrizol heard him last fall, after investment bankers from Citigroup sent a package with descriptions and "Fact sheets" details of 18 publicly traded companies in the chemical industry. Lubrizol caught his eye and he looked annual report of the company.

He met with the bankers on Dec. 13, and asked to set up a meeting with James Hambrick, Lubrizol's CEO. The next day, Mr. Sokol Lubrizol bought shares, according to Mr. Buffett statement.

The Citi bankers stretched out the hand, Mr Hambrick on Dec. 17 and Mr. Sokol and Berkshire possible interest in the company according to a Lubrizol regulatory submission mentioned. Shares, for a four days later, Mr. Sokol sold about 5% profit. He said on CNBC on Thursday, that "not worth it seems", a small number of shares to keep to the end of the year.

But Mr Sokol says he saw Lubrizol as a bargain. Early January he bought more than 96,000 shares, estimated at nearly $10 million, the letter said. Mr Sokol arranged a meeting with Mr Hambrick for month later.

Mr Sokol pitched first Mr Buffett on the idea of the purchase of Lubrizol mid-January. Mr Sokol told him Lubrizol was undervalued and perhaps a good match for Berkshire, says trust in a person with the matter.

In the short call Mr Sokol said Mr Buffett Lubrizol shares owned. Mr Buffett asked if had he bought the stock or how much he spent.

Mr Buffett called Mr. Munger and told him of the place, and mentioned that Mr Sokol Lubrizol held stock, says the person. Mr Buffett neither Mr. Munger related, says trust in a person with the matter.

Mr Buffett was uncertain that Lubrizol's profit margins could be maintained. He bite off the idea of buying the company.

For details, see certain lines in Mr Buffett.

See how Mr Sokol with moving trades in Lubrizol's share price compare.

After Mr Sokol receive profit margins with Lubrizol's Mr. Hambrick and bullish information of the company, Mr Buffett was but more interested in according to the letter. He met with Mr Hambrick and discussions picked up.

March Berkshire Board approved a $9 billion-buy deal Lubrizol. A few days later, Mr. Sokol Berkshire of Chief Financial Officer Marc Hamburg called. "Warren told me you have some shares of Lubrizol." "Can you give the details of me?" Mr Hamburg said, for a person with the subject familiar.

Mr Sokol told the trades to him over the phone and gave the same information outside lawyer for Berkshire. Mr Hamburg was Mr. of Buffett's Office and passed on to him.

Mr Buffett called say they now had a new problem to address, according to a person familiar the matter Mr. Munger.

Mr Buffett Mr. Munger said that he wanted to think about what is to do about the situation, find out that Mr. Sokol Lubrizol participation could pose a problem appearance for Berkshire, said the person.

Mr Buffett said that he would keep it, while he was 19 in Korea and then India, the latter with Microsoft founder Bill Gates on a week-long trip from March.

After he returned, he received a resignation letter from Mr Sokol. Mr Buffett announced the resignation - including the surprising details of Lubrizol - two days later.

-Jean Eaglesham and Erik Holm
contributed to this article.

Write to Serena NG serena.ng@wsj.com and Susan Pulliam at susan.pulliam@wsj.com

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