Billionaire US investor Warren Buffett has admitted he made a “big mistake” in not grilling a top executive allegedly involved in a share-trading scandal.
The investment guru told around 40,000 shareholders gathered at the annual meeting of his conglomerate Berkshire Hathaway he should have questioned David Sokol more thoroughly over why he held shares in a firm Berkshire was looking at acquiring.
Mr Buffett said the company had been battered by the Sokol scandal and a string of natural disasters.
But he assured shareholders Berkshire was strong enough to withstand the hit, despite an estimated $1.7bn (€1.1bn) in insurance losses, which are expected to have driven profits down 58% in the first quarter.
Mr Buffett said he would never understand why Mr Sokol bought stock in Lubrizol shortly before recommending that Berkshire buy the chemical company in a $9bn (€6bn), which he added violated Berkshire’s insider-trading rules.
But Mr Sokol has denied any wrongdoing.
Mr Buffett, talking ahead of first quarter results due from Berkshire on Friday, said the biggest factor in the earnings drop was down to losses related to the Japanese earthquake and tsunami, Australian floods and the New Zealand earthquake.
Mr Buffett estimated Berkshire would report $1.5bn (€1bn) in net income, down from $3.6bn (€2.4bn) last year.
Mr Buffett said all of Berkshire’s policies on ethics and insider trading would be reviewed following Mr Sokol’s alleged share trading.
He spent nearly six hours answering questions at the annual meeting yesterday, alongside Berkshire vice-chairman Charlie Munger.
Mr Sokol resigned from Berkshire in March.
Before his departure, he had served as chairman of Berkshire’s MidAmerican Energy, NetJets and Johns Manville divisions and was once considered Mr Buffett’s potential heir.
Berkshire owns around 80 subsidiaries, including clothing, furniture and jewellery firms.
Its insurance and utility businesses account for more than half of the company’s profits. It also has major investments in such companies as Coca-Cola.