Much of the press reaction to David Sokol's investment in Lubrizol seems to express astonishment that he would have invested personally in something that also might have been something that Berkshire Hathaway would invest in. People seem to have forgotten that there's a recent precedent for mixing personal investing and investing for Berkshire, in an offer that Warren Buffett himself made in his October 6, 2008 "Dear Hank" letter to then-Treasury Secretary Henry Paulson.
That letter proposed a deal in which, in the words of the letter, "The company I head, Berkshire Hathaway, would be pleased to invest $500 million" and "I would be willing to personally buy $100 million of stock in this public offering. (This constitutes about 20% of my net worth outside of my Berkshire holdings, which as you know are promised to charity.)"
Mr. Buffett's defenders, and Mr. Sokol's critics, may argue that the difference is that Mr. Sokol invested personally before Berkshire, while Mr. Buffett was proposing to invest personally simultaneously with Berkshire. But there would have been some similar issues. What if Mr. Buffett wanted later down the line to sell his personal shares but not sell Berkshire's? What if he decided to sell both at the same time? Would he have "inside information" affecting his personal shares because he also controlled the Berkshire shares? It sure would be interesting to know what else Mr. Buffett has in that $500 million portfolio outside of his Berkshire holdings. Are there any other shares of companies that are also held by Berkshire or that might at some time be bought by Berkshire — Mr. Sokol's supposed sin related to Lubrizol? And will those pushing the theory that Mr. Sokol's investment in Lubrizol was somehow illegal because of his status as a Berkshire Hathaway executive put Mr. Buffett's own non-Berkshire investments under the same scrutiny?
My main reaction to the whole situation, based on the facts that have come to light so far, is that there's less here than meets the eye, and that this is hardly the federal case that some critics in the press are trying to turn it into. But even so, the Buffett-Paulson letter suggests that Mr. Sokol was learning from Mr. Buffett's example.