Agenda

Company Overview David Sokol Scandal Facts Failure of Trading Disclosure Company Trading Policies and Procedures Violation Code of Business and Ethics Violation Negative Consequences Scandal Follow Up Conclusion
5/3/12

Company Overview

5/3/12

Company Overview (Continued)

5/3/12

Who is David Sokol?

Widely regarded as the likely successor to

succeed Warren Buffett

Rescue underperforming divisions, Jons

Manville and NetJets at Berkshire Hathaway

Advisor to Warren Buffett on acquisition

targets (i.e. BYD)

5/3/12

Scandal Facts
Dec 13, 2010 Met with City Investment Bankers

Bought 2,300 shares of Lubrizols stocks

Dec 21, 2010

Dec 14, 2010

Sold all the shares back Bought another 96,060 shares of Lubrizols stocks Proposed idea of acquiring Lubrizol to Warren Buffett
March 14, 2011 Jan 14 & 15 , 2011 Jan 5 & 6, 2011

Berkshire purchased Lubrizol with $9 Million

5/3/12

Fraud Incentive
Hide the fact that he bought the stock

after he discussed Berkshires interest of purchase with Citi investment banker

Omit the fact that he is a senior

representative of Berkshire Hathaway

Pressure

Opportunity

Attitude
5/3/12

Failure of Trading Disclosure

Did not fully disclose the amounts and the

timing of his purchase of Lubrizols stock

Create interest of conflict between

shareholders and managers

Violate the law of Delaware and the duty of

loyalty

5/3/12

Code of Business and Ethics Violation

2. Corporate Opportunities

Covered Parties are prohibited from taking for themselves

opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors of the Company

4. Insider Trading

Covered Parties who have access to confidential information

5/3/12 are not permitted to use or share that information for stock

Company Trading Policies and Procedures Violation

Employee are required to review and sign

Companys policies standards are higher

than securities law

Material information

Significant transaction with the company

5/3/12

Insider Trading Negative Consequences

Impacts on Market Stock Price
Lubrizol stock price goes up , Sokol benefits from the

stocks that he bought

Cost Berkshire Hathaway pay for premium price

Affect Companys reputation/ Goodwill

Public/ Investors lose confidence Lose potential investment opportunity Goodwill will go down
5/3/12

Scandal Follow Up
Sokol resigned shortly

Criticism for Buffett

Buffett believes what Sokol did was not

unlawfully

Still deciding if a lawsuit will be filed

against Sokol

5/3/12

Questions

5/3/12