The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [246]
Munger was resigned. “If a policeman follows you down the road for five hundred miles,” he said to Buffett, “you’re going to get a ticket.”
Then Rickershauser made a further proffer to Sporkin, put delicately: “The complex financial interests of Mr. Buffett and Mr. Munger…have apparently raised the impression that compliance with various legal requirements is becoming difficult,” he wrote, noting the pair had tried to comply with both the spirit and the letter of the law. “They now wish to simplify their holdings as rapidly as they can.”39
In their interviews, the SEC lawyers had already explored what simplifying would mean. “Sometime in the future, it is certainly possible that we would merge Blue Chip with Berkshire,” Buffett had responded to their question, “but Blue Chip has a lot of legal problems, and until some of those are resolved, it might be hard to arrive at what we would feel reasonably sure would be a fair exchange ratio. If I had my preferences, it would be that someday they would be merged. So hopefully we would have more or less the same businesses we have now, but less complications. I don’t really like these complications. It may look like I like these complications. I don’t have a great staff to handle it all. It seemed fairly simple while we were doing it,” he said, “but not simple now.”40
Asked by an SEC investigator if Buffett had “contingency plans” to simplify things, “Oh, does he ever,” said Munger. “He has about twice as big a contingency plan as before this investigation started.”41
In considering the proffer, says Sporkin today, much depended on Rickershauser. He “was one of those few lawyers that I’ve met in life that, whatever he told you, you could go to the bank on.” Sporkin viewed Rickershauser as not only a brilliant lawyer but truthful, straightforward, and upright, incapable of being disingenuous. Rickershauser told Sporkin that Buffett was “going to be the greatest person that Wall Street has ever seen” and that “he was the most decent, honorable person you would ever meet.” Coming from almost anyone else, Sporkin would have dismissed this as rhetoric, but coming from Rickershauser, he took these statements to be both sincere and probably well-judged.42 Sporkin felt he had as great a duty to absolve as to convict. He thought that a prosecutor had to differentiate between a fundamentally honest person who had made a misstep and a crook. When it came to crooks, his job was to put ’em away. His view of Buffett and Munger was that they had certainly misstepped, but that they were not crooks.43
And so the giant tapped Blue Chip gently on the wrist.44
The company consented to an SEC finding in which it neither admitted nor denied that it failed to notify investors it was trying to bust the Santa Barbara merger in buying Wesco’s stock and that Blue Chip had artificially propped up Wesco’s market price over the course of three weeks.45 Blue Chip promised never again to do what it had not admitted it had done.46 The consent decree named no individuals. The publicity over the event had been trivial and would fade. Buffett’s and Munger’s records and reputations stayed clean.
Two weeks later, the SEC named Buffett to a blue-ribbon panel to study corporate disclosure practices. It was forgiveness and, above all, a fresh start.47
40
How Not to Run a Public Library
Washington, D.C. • 1975–1976
One day in early 1975, Susie Buffett’s friend Eunice Denenberg came over to the house and sat on the dog-hair-covered sofa in the family room. Susie turned her back so she wouldn’t have to face her friend and turned on the tape deck. Then she sang. Denenberg pronounced approval. They talked about Susie’s dream of singing professionally, which she was too diffident to do anything about herself. Denenberg went home; then she called back the next day and said, “This is your agent.” She enlisted Bob Edson, an assistant music professor