Buffett Bombshell: Who Is David Sokol?

March 31, 2011 — -- David Sokol was considered one of Buffett's top lieutenants and likely successor at investment and insurance company Berkshire Hathaway.

So it came as a shock even to Buffett -- called the "oracle" for his "prophetic" business sense and investing philosophy -- when Sokol submitted a letter of resignation Monday, according to a company press release.

Critics in the business media had 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.

"Contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local paper, there to be read by his spouse, children and friends," Buffet told employees more 20 years ago when he was chairman of Salomon Brothers.

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.

This time, however, the resignation was accepted.

In his 2008 book on management, "Pleased but Not Satisfied," Sokol wrote: "Integrity is not complicated. If it seems to be, you probably do not belong on our team."

The statement seemed emblematic of the hard-hitting businessman from the Midwest, who became known as Buffett's "Mr. Fix It."