Joe Nocera's "Excuses, Excuses, Excuses": Beginning Times Op-Ed Writer Confronts Warren Buffett

Joe Nocera, making his debut as a New York Times op-ed writer, has decided to confront Warrent Buffett in his opening column entitled "Excuses, Excuses, Excuses" (http://www.nytimes.com/2011/04/02/opinion/02nocera.html?hp). Unfortunately for Nocera, he fails, in my opinion, to make his case.

According to Nocera:

"On Dec. 13, some investment bankers meet with [David] Sokol to pitch possible acquisitions. He expresses an interest in Lubrizol and tells them to convey his interest to its chief executive, James Hambrick. He then buys 2,300 shares, selling them a week later. (Go figure.)

The plot soon thickens. In early January, Sokol goes back into the market and buys 96,000 shares at around $100 apiece. A week later, Sokol calls Hambrick and has a preliminary discussion about a possible deal. Sokol then takes the idea to Buffett, mentioning 'in passing' that he owns some Lubrizol stock. Buffett expresses 'skepticism' about a deal. Inexplicably, he says nothing about Sokol’s stock holdings.

Does Sokol let the matter die there? No. For some reason — what could that be? — he’s got a bee in his bonnet about this deal. On Jan. 25, he has dinner with Hambrick; when he reports back to Buffett about the conversation, Buffett becomes interested in making a deal. By early February, Buffett himself is wooing Hambrick. He tells the Lubrizol chief executive that he would like to buy all the company’s outstanding shares for $135 a share.

Sokol, of course, owns a nice little chunk of those outstanding shares. When the deal is announced in mid-March, Buffett’s trusted deputy walks away with a nifty little profit of $3 million or so. Not bad for a few weeks’ work."

Nocera asks, "How is this not, on its face, evidence of insider trading?" Answer: In my opinion, if there was no reasonable certainty of Buffett's interest in doing a deal after Sokol purchased the Lubrizol shares, there is no basis for Nocera's claim.

In the past, did Buffett always follow Sokol's advice? This is critical information that I would want to know. In fact, as observed by Nocera, Buffett expressed "skepticism" about the deal in January.

Pursuant to his working arrangement with Berkshire Hathaway, was Sokol permitted to invest for his own account and then pitch an acquisition to his boss? This is a different matter involving internal corporate policy.

In a nutshell, I believe that important factual information is lacking in this column.