The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [361]
Later that week, he and Munger went down to Washington to see Bill McLucas and Dick Breeden at the SEC. They came into the office looking like “two guys you would see at the Greyhound bus station,” according to McLucas. Then they started talking and laying out their plan to save Salomon; McLucas then understood, he says, why one person he was talking to was considered a legend and the other could finish the legend’s sentences.2
Afterward, Buffett visited the Treasury Department himself to see Nick Brady, who told him that he had thought Buffett was bluffing. “Warren,” he said, “I knew you were going to take the job no matter what we did.”3 It was only the sincerity of Buffett’s plea that had touched him. Wind up the job as fast as you can, Brady said, and get out of there.
Buffett was determined that whatever was wrong at Salomon be found, confessed, and fixed right away. “Get it right, get it fast, get it out,” he said. When he said fast, he meant fast; he talked to his new secretary, who had worked for Gutfreund and knew everybody well. Paula, he suggested, why don’t you start talking to the board members and ask them questions about what they knew and when.4 Bob Denham, the cautious, thorough Munger, Tolles lawyer who had been airlifted in from Los Angeles to head the investigation, got wind of this plan and put a stop to it. The investigating would be done by lawyers.
The first thing Denham did was interview Don Feuerstein. Afterward, Feuerstein was fired summarily. He asked to talk to Buffett, who told him only “You could have done more.” Since Buffett had known that from the beginning, Feuerstein couldn’t understand the about-face.5 Buffett, however, had gradually settled on the conclusion that in his loyalty to Gutfreund, Feuerstein had put his boss’s interests ahead of Salomon’s. Now Denham got the job of general counsel. As Buffett began to assume control, he discovered how much the board had been subjected to what he called adroit “information rationing” by Salomon’s management. He and Munger now learned that when Mozer had first admitted in April to submitting an unauthorized bid, the firm had also discovered that he had tried to cover it up, and had misled the customer whose name he had used by claiming their falsely submitted order for Treasury bonds was a clerical error.
“It was as if Mozer had lit a match. And Mr. Gutfreund could, on April twenty-ninth, have blown out that match that Mozer lit, and instead he did nothing about it.
“And it turned out that Mozer had certain characteristics of a pyromaniac and tended to light matches more often than we thought. Mr. Gutfreund’s responsibility was to do something about that when he saw it. He at first did nothing and then later started, perhaps in panic, pouring gasoline on it.
“The end result was that the shareholders of Salomon would be cost hundreds of millions of dollars, and eight thousand employees and their families would fear for their jobs.
“I think it was the simplest thing in the world to do. Here you have a fellow, Paul Mozer, who admits submitting false bids to the most important client and regulator in the world, the U.S. government. And then you know he’s tried to cover it up by dragging in a customer and trying to get that customer to cooperate with a cover-up so that the government won’t find out.
“None of that was Mr. Gutfreund’s fault at all.
“But when you hear about an action like that, it is very obvious in ten seconds that you pick up the phone and say, Mozer, you’re fired. Then you go right over to Jerry Corrigan and say,