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Berkshire Hathaway Chairman Warren Buffett was not exaggerating when he stated at the opening of the company's March 30, 2011 press release (here) that the release "will be unusual." Not only did Buffett disclose the resignation of David Sokol as Chairman and CEO of several subsidiaries, but the release also revealed that Sokol had acquired shares of Lubrizol before bringing the idea to Buffett that Berkshire should acquire Lubrizol. (Berkshire had announced its intention to acquire Lubrizol just days earlier.)
As odd and inexplicable as were the events described in the March 30 Berkshire press release, the story became even odder and more inexplicable as information came out that Sokol acquired Lubrizol shares after specifically discussing -- apparently as a representative for Berkshire -- with investment bankers that possibility that Lubrizol might be an appropriate acquisition target for Berkshire. Sokol also apparently acted as a representative for Berkshire in connection with negotiations with Lubrizol about a possible Berkshire acquisition.
Given the high-profile and sensational nature of these allegations, it was perhaps inevitable that litigation would follow. Indeed, a lawsuit was duly filed in Delaware Chancery Court on April 18, 2011. The complaint, which can be found here, presents a shareholders' derivative claim against Berkshire, as nominal defendant, as well as against Sokol and against the twelve individual members of Berkshire's board - including not only Buffett, but his chum Charlie Munger and his fellow billionaire Bill Gates. The complaint asserts two substantive claims, one against all of the individual defendants for breach of fiduciary duty and one against Sokol for disgorgement.
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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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Very hard to understand the whole article.