Warren Buffett's Firm to Pay $896,000 Penalty

Warren Buffett's Firm to Pay $896,000 Penalty

OMAHA, Neb. — Aug 20, 2014, 5:22 PM ET
By JOSH FUNK AP Business Writer

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Warren Buffett's company has agreed to an $896,000 penalty for failing to tell regulators about a December 2013 investment in wallboard maker USG Corp. beforehand.

The Federal Trade Commission said Wednesday that Berkshire Hathaway Inc. should have notified the Justice Department before it converted $325 million of senior USG notes it held into 21.4 million shares of the company.

Because Berkshire was already a significant USG shareholder, antitrust laws required it to notify regulators because of the size of the deal. At the end of June, Berkshire held just over 39 million USG shares.

Berkshire did correct its initial filing after the USG investment and clarify that it should have notified officials. But regulators said Berkshire made a similar mistake six months earlier when it acquired securities in Symetra Financial Corp.

"Although we may not seek penalties for every inadvertent error, we will enforce the rules when the same party makes additional mistakes after promises of improved oversight," said Deborah Feinstein, Director of the FTC's Bureau of Competition. "Companies and individual investors alike should ensure that they have an effective program in place to monitor compliance."

Buffett issued a statement Wednesday afternoon and described the matter as a simple mistake. He said Berkshire had owned the convertible USG notes since 2008 and was essentially forced to convert them into stock when USG redeemed them in 2013.

"This event triggered a filing requirement for Berkshire and we were late in realizing that fact," Buffett said.

Besides the two examples of filing delays regulators cited, Berkshire filed a document with the Securities and Exchange Commission last week that it said should have been filed in 2009. That document disclosed Berkshire's 72.6 million preferred shares of Dow Chemical stock.

KBW analyst Meyer Shields said he believes Buffett's explanation that the USG filing was an honest mistake, but the pattern of several filing errors might suggest that Berkshire's compliance systems haven't kept up with regulations.

Berkshire is a large conglomerate that owns more than 80 subsidiaries in a variety of industries, including insurance, utilities, railroads, retail and manufacturing.

Berkshire employs more than 330,000 across all its companies, which include Geico insurance and BNSF railroad, but only 25 people work at its headquarters in Omaha, Nebraska. The tiny headquarters staff takes care of Berkshire's regulatory filings and files the company's 23,000-page federal income tax return.

Besides owning companies outright, Berkshire also holds sizeable investments in firms such as USG, Coca-Cola Co., Wells Fargo Co. and IBM.

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