The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [245]
Rickershauser had been studying a chart that showed all of Buffett and Munger’s complex financial interests. Buffett sat at the center, buying Blue Chip, Diversified, and Berkshire, Wattling them into so many pockets that it made Rickershauser shudder.33 Everyone knew Buffett, the great white shark, was virtually helpless to stop himself from acquiring these stocks. If he found ten bucks and spied a share of Blue Chip, Berkshire, or Diversified, he charged, grabbed, and threw the stock in the nearest drawer. After he and Munger had bought the first twenty-five percent of Wesco, Rickershauser had finally advised Buffett to buy stock only through formal tender offers to avoid the appearance of impropriety.34 The complex cross-holdings that Buffett had created made it seem as though he was trying to hide something. Rickershauser looked at the crazy diagram and fretted, “There’s got to be an indictment in there somewhere.”35 He didn’t think the SEC would have enough evidence to convict, but it would be awfully easy to accuse.
In the greater sense, Munger was a two-bit player, his financial stake minute compared with Buffett’s. He had been snared as a petty accomplice. But since Blue Chip was his territory, he was a principal in the Wesco saga and thus played a central role in the SEC’s questioning.36 He admitted to Seidman, “We do have a very complicated set of business affairs, and I think we have learned, to our regret, that that may not be too smart. But we tried to keep all the balls in the air and properly sequenized with the other balls and handle them honorably.”
Despite the pair’s protestations and the fact that it could find nothing wrong with the San Jose Water Works or Source Capital deals, the SEC kept going. The tiger of a prosecutor now recommended to Sporkin that the SEC file charges against Buffett and Munger personally. He was unswayed by Buffett’s and Munger’s testimony and believed that they had intentionally quashed the Santa Barbara merger by overpaying for Wesco’s stock. He was unsympathetic to the “who was harmed?” explanation for paying more for the stock and thought the pair was splitting hairs too fine in its explanations of events.37
Rickershauser wrote Sporkin directly. He pleaded with him not to prosecute Buffett and Munger, “individuals who value their good names and reputations as their most priceless possessions,” because “many people, probably most people, assume evil conduct on the part of anyone civilly prosecuted by the commission.” Even if Buffett and Munger consented to a settlement without admitting or denying the charges, merely filing them would cause “terrible, irreversible damage” because “the good reputation of the commission automatically and inexorably destroys the good reputation” of the defendants. “A giant’s strength should be used with great discretion,” he urged. “The risk from inadvertent oversights in business should not become so onerous that people who value their reputations are deterred from participation.”38 He begged to save Buffett’s and Munger’s reputations by offering to consent to an order on minor, technical disclosure violations on behalf of Blue Chip only, as long as the consent decree did not name any individuals.
The panic inside Buffett’s mind can only be imagined. Within the office, he did his best to maintain an imperturbable facade so as not to alarm his office staff, any of whom might be interviewed by the SEC.
Rickershauser worked like a stevedore to portray his clients as upstanding citizens from the perfect model families. He sent in biographies of Munger and Buffett to the SEC, stressing their charitable work, the many boards on which they served, Howard Buffett’s tenure as a Congressman, and the millions of dollars of taxes that Buffett