<a href="online.wsj.com/article/SB100014240527487...;>Sokol resigns</a> and Buffett maintains that his former lieutenant didn't do anything "unlawful"?
The SEC will certainly have a view on this, but certainly it was unethical. In his press release, Buffett says that Sokol's purchases were made <span style="font-style:italic;">before</span> (his italics not mine) discussing Lubrizol as a potential acquisition candidate. But here is the issue. There are two outcomes of Sokol's January 14th or 15th conversation with Buffett:
1) Buffett doesn't buy Lubrizol
2) Buffett buys Lubrizol
Since Lubrizol wasn't pricing in a Buffett takeover when Sokol starting buying, he didn't have much to lose. Heads he wins; tails he doesn't lose. That sounds like a pretty good bet to me.
Imagine Sokol had a strategy where he would buy stock in a company and then bring the idea to Buffett as a potential acquisition. Clearly that would be a winning strategy - if it were legal.
Sokol clearly had material non-public information. If a third-party bought Lubrizol with the foreknowledge that Sokol would be discussing it as a possible acquisition target, that would clearly be trading with material non-public information.
It bothers me that Sokol did this and it bothers me that Buffett does not see that his action was wrong.