Berkshire Hathaway's annual meeting is normally a celebration of investment success, but this year was a little different
Warren Buffett's former heir apparent, David Sokol, accused his old boss of "flip flopping" and "scapegoatism", as the issue of Mr Sokol's controversial share trading descended into a bitter war of words. The former executive's attack came hours after Mr Buffett used the annual shareholder meeting of his conglomerate, Berkshire Hathaway, to rebuke Mr Sokol for buying shares in a company that he had been pushing Berkshire to acquire.
The issue dominated the annual meeting in Mr Buffett's home town of Omaha, Nebraska, an event that is normally a celebration of the billionaire's investment smarts and folksy wisdom.
Instead, this year, Mr Buffett has been fighting his biggest crisis in two decades. Mr Sokol's share trading was revealed in a resignation statement in March, when – rather than condemning him – Mr Buffett lavished praise on his departing executive. It was only last week that Berkshire declared that Mr Sokol had broken its ethics rules, and only on Saturday that Mr Buffett himself weighed in, telling an estimated 40,000 Berkshire shareholders that the trades were "inexplicable" and "inexcusable".
The reaction from Mr Sokol was swift and swinging. In a statement, his lawyer, Barry Levine, said his client was "deeply saddened that Mr Buffett, whom he considered a friend and mentor, would disparage him as he has done today".
He went on: "It is alarming that Mr Buffett would be advised to so completely flip-flop and resort to transparent scapegoatism. After 11 years of dedicated and hugely successful service to various Berkshire Hathaway subsidiaries, Mr Sokol would have expected to be treated fairly."
Mr Sokol began buying $10m of shares in Lubrizol, a chemicals company, one day after picking it from a list of potential acquisition targets and instigating talks with a view to a takeover by Berkshire. When the acquisition did indeed happen, Mr Sokol's shares soared in value by $3m. He says he did nothing illegal or wrong.
Mr Buffett admitted that Mr Sokol had told him before the deal that he had a stake in Lubrizol, and said: "I obviously made a big mistake by not saying, 'Well, when did you buy it?'" Mr Buffett said.
The billionaire investor also addressed the issue of why he did not initially condemn the man who many had assumed would be Berkshire's next chief executive. He didn't want to "create problems for him in years to come" without also noting all the good work he did for Berkshire during his career, Mr Buffett said. Berkshire's vice-chairman, Charlie Munger, was more unforgiving about that controversial initial statement. It "wasn't the most clever press release in the history of the world," he said. And Mr Buffett joked: "What I've learned over the last year is, I'm going to have Charlie write the next press release."
After the annual meeting drew to a close, a new area of dispute appeared to open up between Mr Buffett and Mr Sokol. Mr Levine's statement claimed the two men had not spoken since the resignation and that Mr Sokol had never been given a chance to correct mistakes in Berkshire's version of events.
Interviewed by Bloomberg television, Mr Buffett said the pair had had two telephone conversations, but that he had cut them short. "He was somewhat unhappy about the degree to which the lawyers were maybe sequestering records," Mr Buffett said. "I said, 'Look, I'm going to be asked about every conversation with you so the only thing to do is not talk'."
The departure of Mr Sokol robbed Berkshire of a potential successor to the 80-year-old Mr Buffett and raised new questions about the future of the company. Mr Buffett made no revelations on the succession plan, except to predict that the candidate who replaces him would be "straight as an arrow".
The day-long annual meeting also addressed the latest Berkshire results, released late on Friday, in which the company said it was likely to make an underwriting loss in its insurance business this year for the first time in a decade. The Japanese tsunami, the New Zealand earthquake and Australian floods led to an underwriting loss of $821m in the first quarter.