Berkshire Hathaway wins dismissal of shareholder lawsuit

Insider trading case dismissed without prejudice, SEC investigation still pending

Warren Buffett and his Berkshire Hathaway conglomerate have emerged unscathed from an insider trading case, winning dismissal on Monday of a shareholder lawsuit. The company’s shareholders sued its board for failing to take legal action against former executive David Sokol, who violated Berkshire’s insider trading policy.

Sokol resigned in 2011, after admitting to buying shares of chemical company Lubrizol Corp. and then pressuring Berkshire CEO Warren Buffett to purchase the company. According to Buffett, Sokol made a $3 million profit on the Lubrizol shares. The value of those shares skyrocketed after Berkshire announced its plans to buy the company.

Shareholders were seeking compensation for the damage done to the company’s reputation, as well as the right to pursue a derivative lawsuit on behalf of the company. Delaware Chancery Court judge Travis Laster dismissed the case, saying the shareholders failed to show that Berkshire’s board was unable to be trusted to take action against Sokol, but the dismissal was without prejudice, so shareholders may still file an amended suit.

A Securities and Exchange Commission investigation of Berkshire is pending, though the company’s attorney said he did not know its status.

Read more at Reuters.

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