Lawsuits involving David L Sokol after he joined Berkshire Hathaway suggest that management had some warnings about his rules-pushing nature long before his resignation last week for buying stock in a company shortly before Berkshire acquired it.
The most serious lawsuit centered on the accounting of an irrigation project by MidAmerican Energy, where Sokol was chief executive when Berkshire bought it in 1999.
In a rebuke last year, the judge ruled in that case that MidAmerican had improperly changed its accounting on the project and criticised Sokol directly. The change in accounting was ?intended to eliminate the minority shareholders? interests,? the judge wrote, awarding more than $32 million to the minority shareholders.
The case had taken more than five years to work its way through the courts. During that time, Warren E Buffett, the chief executive of Berkshire, expressed confidence in Sokol by broadening his portfolio beyond MidAmerican to include Netjets, a company that sells fractional use of private aircraft.
After Sokol took over Netjets in July 2009, some critics complained about his management style and his strategy for shrinking the company, which had been ailing even before the financial crisis did more severe damage.
Under Sokol?s direction, the aircraft company filed a suit last November seeking to learn which employees had provided information to Alice Schroeder, the author of ?The Snowball,? the best-selling biography of Buffett. Schroeder declined to supply the information, and her lawyer characterised the action as a witch hunt. The suit was dropped on Monday.
The lawsuits would have been ?yellow lights: if not danger signals, at least warning signs,? Schroeder said in an interview on Monday. ?Disputes in business are common, but both of these speak to the integrity of the management, not just ordinary business wrangling.?
Some others have questioned Sokol?s hard-charging style as well.