By Andrew Frye - Feb 29, 2012 6:47 AM GMT+0700
David Sokol, the executive who left Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) amid accusations of violating insider-trading rules last year, is receiving $1 million annually from the company in retirement payments.
Sokol, who stepped down as chairman of Berkshire’s MidAmerican Energy Holdings Co. (329802Q) in April, collected $750,000 last year tied to the supplemental executive retirement plan, or SERP, MidAmerican said yesterday in its annual statement. The payments are being made pursuant to a contract with the company that was in existence before Berkshire acquired control, a person familiar with the arrangement said.
David Sokol. Photographer: Brendan Hoffman/Bloomberg
Sokol, 55, broke company regulations by trading the stock of a company that he suggested that Buffett consider buying, Omaha, Nebraska-based Berkshire said in April. Sokol bought shares of Lubrizol Corp. in January 2011, less than three months before Berkshire announced an agreement to acquire the company for about $9 billion. Sokol has denied wrongdoing.
“Not paying that money would likely involve a lawsuit on his part,” said Joseph Sorrentino, a managing director at Steven Hall & Partners, a compensation-consulting firm. “At some point, some companies just say ‘the time, money and effort it would involve is not worth the money we would be saving if we won.’”
Ann Thelen, a spokeswoman for MidAmerican, didn’t return calls seeking comment. Buffett didn’t respond to a request for comment. Barry William Levine, an attorney for Sokol at Dickstein Shapiro LLP in Washington, didn’t immediately return a call seeking comment.
Surprise Announcement
The company standard that limits payments to executives fired for cause has exceptions, including one where there is a prior agreement, MidAmerican said in a filing in 2008 outlining the supplemental retirement plan for designated officers.
Sokol’s resignation was not requested and came as a surprise, Buffett said in the March 2011 statement that announced the departure and disclosed the Lubrizol trades. Sokol said he was quitting Berkshire to focus on philanthropy and investing his family’s wealth, according to Buffett.
Buffett, Berkshire’s chairman and chief executive officer, said in April he made a “big mistake” in his oversight of Sokol. The MidAmerican CEO until 2008, Sokol cashed out his executive life insurance policy and was paid $97,686, the energy company said.
Sokol was paid $231,250 in salary for 2011 and $301,687 when he elected to take “a one-time lump sum payment of his MidAmerican Energy Company Retirement Plan,” MidAmerican said. Sokol’s total compensation from MidAmerican for 2011 was $10.4 million, including a $10.1 million change in his pension value, according to the company. Under his agreement, “no cash severance incentive payment or continuation of benefits was owed to him,” according to yesterday’s filing.
Gregory Abel, the MidAmerican CEO who added the title of chairman as Sokol departed, received total compensation of $9.9 million last year, including a $7 million bonus, the unit said.
To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
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