UPDATED I have just finished reading 2 weeks' worth of articles and blog posts about the Sokol Debacle. While (virtually) everyone agrees that he behaved unethically, it's striking how quickly most writers dismiss the possibility that Sokol could be found guilty of insider trading. Insider trading is hard to prove, but until more facts are known, it seems a bit early to jump to conclusions about whether Sokol will be charged with or be found to have committed insider trading. Only a few facts are publicly known, and it appears that even Buffett/Berkshire may have had incomplete information when they declared that Sokol did nothing "unlawful." At this point, I'm agnostic on the insider trading question until more facts are known. Some speculations about related issues:
> I suspect Sokol's story will continue to crumble and more evidence will emerge that suggests he was in possession of what some would consider material nonpublic information when he bought the stock in Lubrizol (whether or not he is charged with anything). There were gaps and holes in the story given out in Sokol's ill-conceived CNBC interview, including a vagueness about how the idea of Lubrizol first came to his attention. Chances are that more details will be forthcoming and they will not be flattering to Sokol because whatever is flattering has already come out in his own version of the story.
> IThe old truism that the cover-up is worse than the crime may come into play. (p.s. I use the term "crime" partly as a metaphor because most insider trading cases are civil, not criminal.) Statements made in Sokol's CNBC interview have been contradicted by Lubrizol's amended preliminary proxy statement. Although a cash deal, Berkshire's acquisition of Lubrizol must be approved by Lubrizol's shareholders, and therefore public communications before the vote presumably are subject to scrutiny for how they might affect the transaction's consummation or its price. From a statement in a March 24, 2011 Department of Justice press release by William J. Maddalena, Acting Special Agent in Charge of the FBI's Miami Office, about an (unrelated) criminal case: "When false statements are disseminated to deceive the investing public, whether they're designed to prop up a company or tear it down, the FBI will dedicate all available resources to bring disseminators of such falsehoods to justice." Even if Sokol's intended purpose was not primarily to protect and enable the acquisition, he was clearly a beneficiary by $3 million if it was consummated.
> I think it's very likely that Buffett will distance himself from Sokol at at the shareholder meeting, without necessarily doing a 180 degree turn and saying he was mistaken in the original press release.
> CHANGE IN POINT OF VIEW. ORIGINALLY I didn't think Buffett was going to entertain questions on this subject at the meeting. I think he'll talk about it for maybe five or ten minutes in a statement at the beginning of the meeting, much of which time will be a recap of what happened. He could then cite litigation as a reason for why he can't have an open-ended discussion and take questions. However, my current thought is that it doesn't really matter whether he formally takes questions or just makes a statement. Whatever he decides to say in advance, he can put out in any format he wants, including answering some questions that don't contain any information beyond what he's willing or able to share. The derivative litigation is almost certain to constrain what is said, whether that is specifically identified or not. Either way, I'm pretty sure Buffett will open with a statement about Lubrizol because nobody will be able to pay attention to the rest of what he says until he puts this to rest.
> Whatever he says, listen carefully to the nuances. I know that many of you are preparing to interpret these statements, and also are drafting questions for the meeting that touch on important topics other than the question of insider trading. Let me remind you once again that everything Buffett says is extremely precise and literal. The implications of his statements will be bounded by the exact words employed, no more and no less. Make your interpretations and draft your questions accordingly.