— Warren Buffett biographer Alice Schroeder calls him out in her Bloomberg column for downplaying the David Sokol scandal, and she points out that it would be wise for the SEC to look at all of Sokol’s past trades:
Not surprisingly, according to the Financial Times, the SEC is now beginning an investigation. Presumably, it will look into whether there are similar patterns of trading in advance of other acquisition pitches by Sokol to Berkshire, whether consummated or not. One specific transaction that has piqued the curiosity of onlookers for months is Sokol’s purchases of shares of Middleburg Financial Corp. (MBRG) since 2010. And even if the SEC concludes that Sokol did nothing illegal, the known facts suggest that what Sokol did was wrong.
It would be inexcusable for the chief executive officer of Berkshire Hathaway to front-run a potential acquisition this way. Why then, couldn’t the CEO of Berkshire admit it is inexcusable for one of his own senior managers to do so? Instead of condemning Sokol, Buffett gave him a pat on the back on the way out the door. Since when is it enough to merely uphold the letter of the law, especially at Berkshire? Whatever happened to Buffett’s famous saying, “Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless”?
It’s too bad that Buffett missed an opportunity to show moral courage, stand up for principle, reinforce to his employees what he expects from them, and, not least of all, to live up to his own public reputation.