According to the report, Sokol may have broken state law when he failed to disclose he owned shares of a company he was encouraging Buffett to buy, the report said. According to Buffett, Sokol mentioned in passing that he held shares of Lubrizol Corp and neither of the two believed that a law has been broken.
Sokol made $3 million from Lubrizol when Berkshire bought the company. However, Buffett's board said on Wednesday that Sokol owed the company a "duty of loyalty" under state law, and his failure to disclose key information was a violation of that duty. According to Legal experts, the statements could expose the company to lawsuits and further investigations, including an ongoing probe by the Securities and Exchange Commission.
Berkshire"s increasing returns for most of the last half-century reflected its founder"s instincts, impeccable reputation and eye for value. The Sokol affair has raised questions on these issues and without these features, Berkshire is just another conglomerate.