In an "unusual," to say the least, news release tonight, Warren Buffett announced the sudden resignation of David Sokol, the Berkshire Hathaway executive who had been widely expected to eventually succeed Buffett as Berkshire's CEO.
Why? Sokol wants to "create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests."
But that's not all.
In the release, which Buffett says he's written "almost as if it were a letter," he also recounts at some length how Sokol had bought shares of Lubrizol before Berkshire announced its $9 billion acquisition of the company on March 14.
Buffett first heard from Sokol that he owned Lubrizol shares two months ago, and "learned" details of the puchases (and a sale) just before he left for Asia less than two weeks ago.
Yet Buffett writes he didn't ask for Sokol's resignation and it came as a "total surprise" when Sokol's resignation letter arrived Monday afternoon, delivered by Sokol's assistant.
And he writes explicitly, "Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign."
That raises the question: If the Lubrizol stock buys aren't behind Sokol's resignation, why did Buffett include the narrative?
It sounds like a pre-emptive "get it all out there" disclosure that's meant to blunt reaction to negative news by telling the entire story the way you see it right away, before it trickles out through insinuating news reports.
As he defended Goldman Sachs just after the SEC filed a complaintagainst the firm in May, 2010, Buffett told us Goldman had "lost the PR battle" because it did not publicly respond quickly enough to the SEC's accusations.
"I think in terms of getting the facts out, the sooner you do it, as I've said, get it right, get it fast, get it out, get it over. That's easier said than done, but I do think that's generally a good guideline whenever some event causes you a problem."
Did Buffett think that someone might see a problem with Sokol's stock purchases?
In the release, Buffett recounts how Sokol "brought the idea for purchasing Lubrizol to me on either January 14 or 15." At that time, says Buffett, Sokol mentioned that he owned some Lubrizol shares. It was a "passing remark" and Buffett says he didn't ask for details.
At first, Buffett says he was "unimpressed" with Sokol's idea.
On January 24, Buffett "sent Dave a short note indicating my skepticism about making an offer for Lubrizol and my preference for another substantial acquisition for which MidAmerican had made a bid." (MidAmerican is a Berkshire subsidiary. Sokol was its Chairman.)
Buffett, however, "quickly warmed to the idea" after Sokol reported on his January 25 "dinner conversation" with Lubrizol CEO James Hambrick.
Buffett points out that the "offer to purchase was entirely my decision" and that "Dave's purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea."
"In addition, of course, he did not know what Lubrizol's reaction would be if I developed an interest. Furthermore, he knew he would have no voice in Berkshire's decision once he suggested the idea; it would be up to me and Charlie Munger, subject to ratification by the Berkshire Board of which Dave is not a member."
That ratification came on March 13.
A few days later, Buffett writes that he "learned that Dave first purchased 2,300 shares of Lubrizol on December 14, which he then sold on December 21. Subsequently, on January 5,6 and 7, he bought 96,060 shares pursuant to a 100,000-share order he had placed with a $104 per share limit price." Buffett does not say how he "learned" those details.
More than a week later, Sokol resigns.
Buffett ends with this sentence: "I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release."
There are, however, many questions still being asked, with suggestions that Sokol should have been fired for creating even the appearance of impropriety. (Check out the heated discussion on The Kudlow Report tonight.)
At this point, it feels like Buffett is losing his own "PR battle" despite his self-described "unusual" press release. He got it out fast, but he may not be getting it 'over.'
We'll hear directly from Sokol when he appears live on CNBC's Squawk Box tomorrow (Thursday) morning at 7:40 AM ET.
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