Can of Worms Still Open on Sokol Incident

In a surprise move, the board of directors at Berkshire Hathaway BRK.A BRK.B released the findings of their own internal investigation into the trading activity of David Sokol, former chairman of MidAmerican Energy and former chairman and CEO of NetJets, in shares of Lubrizol LZ prior to that company being acquired by Berkshire in March of this year.

The board found that Sokol not only violated the company's trading policies (and its code of conduct) by purchasing shares of Lubrizol "while serving as a representative of Berkshire Hathaway in connection with a possible business combination," but that his "misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor" that he owed to the firm.

While this is in line with our view of the trading activity, and could put to rest some of the criticism that has been laid at Warren Buffett's feet in the aftermath of his oddly structured press release at the end of last month (which announced Sokol's departure and walked through the former employee's stock trades), it will not put a lid on the can of worms that has been opened as a result of this incident.