David Sokol, the Deal Maker

David L. Sokol had been portrayed in recent years as Berkshire Hathaway’s Mr. Fix-it. But Mr. Sokol had also become a crucial player in Warren E. Buffett‘s deal-making machine, serving as a point man for Berkshire on a number of possible transactions, particularly during the financial crisis.

Mr. Sokol’s deal-making, of course, is what has landed him in hot water with Mr. Buffett and the Berkshire board. On Wednesday, a committee of Berkshire directors said Mr. Sokol had misled Mr. Buffett and other executives about his stock purchases in Lubrizol, a company that Berkshire agreed to buy last month.

The audit committee said the conduct violated Berkshire’s business ethics and insider-trading policies. The board’s report was a sharp departure from the more conciliatory stance Mr. Buffett took toward his erstwhile lieutenant when he first disclosed Mr. Sokol’s Lubrizol trading.

One of the most unusual details to emerge from the board report was that Mr. Sokol never told Mr. Buffett that Citigroup bankers had pitched the Lubrizoil idea to Mr. Sokol. Mr. Buffett only found out about the bank’s role after the deal was announced in mid-March, when a Citigroup executives called Mr. Buffett to congratulate him on the deal and told him about the bank’s involvement.

Unlike Mr. Buffett, who famously jibes investment bankers, Mr. Sokol enjoyed engaging with them. As chief executive of MidAmerican Energy Holdings, the Iowa utility, Mr. Sokol aggressively employed their services in the last decade as he built MidAmerican into one of Berkshire’s largest units, largely through acquisitions.

In 2008, Mr. Sokol stepped down as chief executive of MidAmerican and replaced himself with his protégé, Gregory Abel. That freed up Mr. Sokol to
play a broader role in Berkshire’s empire. It was about that time that his deal-making activity picked up. In September 2008 alone, the peak of the financial crisis, Mr. Sokol led Berkshire in discussions about a number of different deals.

Mr. Sokol headed up Berkshire’s talks with Lehman Brothers about a possible capital infusion in the ailing bank, according to bankruptcy court filings. Hugh E. McGee III, the head of Lehman’s investment banking unit who had for years advised MidAmerican as an energy banker, called Mr. Sokol in July 2008 about a potential investment by Berkshire. Mr. Sokol expressed interest, but Mr. Buffett dismissed it as unrealistic.

In September, a week prior to Lehman’s bankruptcy, Mr. McGee again reached out to Mr. Sokol with a “Hail Mary” pass and asked, “Do you have any ideas to save us?”

Mr. Sokol, bear hunting in Alaska at the time, told Mr. McGee that he was stumped.

Back from Alaska, September remained a busy month for Mr. Sokol. The day after Lehman’s bankruptcy filing, Mr. Sokol cold called Mayo A. Shattuck III, the chief of Constellation Energy, whose stock was in a death spiral. Mr. Sokol told Mr. Shattuck that MidAmerican was interested in a possible deal and that he would immediately fly to Baltimore to try to reach one.

Mr. Sokol hopped on a NetJets plane, and by the next day he had forged an agreement for MidAmerican to buy Constellation for $4.7 billion. The
deal fell apart — and garnered Berkshire a tidy $1.2 billion breakup fee — after a French utility outbid MidAmerican for
a 50 percent stake in Constellation. (On Thursday, Constellation agreed to be bought by Exelon.)

Later that same month, Mr. Sokol was in Hong Kong to announce Mr. Buffett’s investment in BYD, a Chinese electric car manufacturer. Mr. Sokol had been the point person on the deal, flying to China to conduct due diligence on the company.

In 2009, Mr. Sokol’s role at Berkshire appeared to have reverted back to operations. In July 2009, Mr. Buffett installed him as head of its then-struggling NetJets unit. For instance, Mr. Sokol did not play a part in Berkshire’s largest acquisition to date, its $26 billion purchase of Burlington Northern Railroad.

Earlier this year, we now know, Mr. Sokol began doing deals again. When Mr. Buffett announced Mr. Sokol’s resignation earlier this month, he praised Mr. Sokol’s work on the Lubrizol deal.

“Though the offer to purchase [Lubrizol] was entirely my decision,” wrote Mr. Buffett, “it would not have occurred without Dave’s early efforts.”