The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [555]
34. During Buffett’s testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 125, he acknowledged that he and Munger had been buying shares of Wesco in the open market during a tender offer and Rickershauser had advised him to stop, saying that they should use only tender offers to accumulate further shares (which they did). Rickershauser interjected, “I want the record to be clear that I did not tell them it was illegal to do what was done. I told them it would be hard to convince somebody that in hindsight they may not have intended to do what they did. You can swear me in if you want to on that one. I didn’t want to be right.”
35. Said to a colleague.
36. The SEC apparently considered Buffett, Munger, and Guerin’s interests and the companies a controlled group for purposes of tender offers. The combination of Warren (11%), Susie (2%), Munger and his partners (10%), Berkshire Hathaway (26%), and Diversified (16%) controlled 65% of Blue Chip’s stock. Warren and Susie owned 36% of Berkshire and 44% of DRC. Munger owned 10% of DRC. DRC owned 15% of BRK and 16% of BC. BC owned 64% of Wesco.
37. The “harm principle” was articulated by scholars such as John Locke, Wilhelm von Humboldt, and John Stuart Mill, who argued that the sole purpose of law was to prevent harm, and the individual’s liberty should not be encroached otherwise. The harm principle is the basis for certain portions of the U.S. Constitution.
38. Chuck Rickershauser Jr. letter to Stanley Sporkin, November 19, 1975.
39. Chuck Rickershauser Jr. letter to Stanley Sporkin, December 1, 1975.
40. Warren E. Buffett testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 157.
41. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, p. 197.
42. Interview with Judge Stanley Sporkin. Sporkin served as general counsel to the CIA after leaving the SEC in 1981. He became Judge of the U.S. District Court for the District of Columbia in 1985 and served till his retirement in 2000.
43. Ibid. For more on Sporkin see Jack Willoughby, “Strictly Accountable,” Barron’s, April 7, 2003; Peter Brimelow, “Judge Stanley Sporkin? The Former SEC Activist Is Unfit for the Federal Branch,” Barron’s, November 4, 1985; Robert M. Bleiberg, “Sporkin’s Swan Song?” Barron’s, February 2, 1981; “Why the SEC’s Enforcer Is in Over His Head,” BusinessWeek, October 11, 1976.
44. “I bet on a good horse,” says Sporkin, “and the horse came in.”
45. After the deregulation of the S&L industry, Santa Barbara lost $80.9 million during fifteen straight quarters in the early 1980s. In June of 1984, Ivan Boesky was close to buying it and infusing it with a desperately needed $34 million, but that fell through. In 1990 it was seized by federal regulators, placed in conservatorship, and operated by the Resolution Trust Corp. until Bank of America bought it in 1991 for $41 million.
46. The company also paid a $115,000 fine. “Consent to Judgment for Permanent Injunction and Other Relief,” “Final Judgment for Permanent Injunction and for Other Relief and Mandatory Order and Consent with Respect Thereto,” and “Complaint for a Permanent Injunction and Other Relief,” In the Matter of Securities and Exchange Commission vs. Blue Chip Stamps, June 9, 1976.
47. The SEC Advisory Committee on Corporate Disclosure, July 30, 1976.
Chapter 40
1. Doug Smith, “Solid Buffett Voice Melts Debut Jitters,” Omaha World-Herald, May 9, 1975.
2. Interview with Charlie Munger.
3. Charles Munger letter to Katharine Graham, December 9, 1974. Munger wrote “dilly” when he apparently meant “silly.” For clarity, “silly” has been used in the text.
4. Interview with Fred Stanback.
5. Interviews with Roxanne Brandt, Walter Schloss. Brandt later jokingly admitted this was grounds for divorce.
6. New York Daily