New York
Warren Buffett’s Berkshire Hathaway has been fined nearly $1 million (Dh3.67 million) by the US Department of Justice for allegedly breaching reporting requirements when building a stake in a construction supplies company.
The incident was the second time in six months that the company failed to notify the US competition authorities about major share purchases, according to a complaint filed in a Washington court on Wednesday.
The company was let off with a warning when it ignored the reporting threshold for its stake in a life insurance group last summer, but the US Federal Trade Commission sought legal action when it happened again in December 2013.
A company is required to halt share buying and file notification with antitrust agencies if its stake in any other company reaches more than $283.6 million. The law gives the FTC a chance to prevent anti-competitive acquisitions before they become a fait accompli.
Berkshire passed the reporting threshold amount at USG, a $4 billion construction supplier whose main product is drywall, when it converted debt holdings into equity on December 9 2013. The conversion gave Mr Buffett’s vehicle a 28 per cent stake valued at $950 million.
Breaches of the rules attract fines of up to $16,000 per day. Berkshire did not admit any of the allegations, but agreed to pay a penalty of $896,000, subject to court approval of the settlement.
The company did not immediately return a call requesting further details of the alleged breaches or whether it had introduced new procedures as a result of regulatory actions.
The DoJ lawsuit reveals previously undisclosed details of an exchange between Berkshire and the FTC last year after what the company said was an “inadvertent” breach of the reporting requirement for Symetra Financial. It notified the regulator of its $310m stake in the insurer one week late on July 2.
The FTC wrote a letter on December 5 saying it would not recommend a civil penalty but reminded Berkshire that it “is accountable for instituting an effective program to ensure full compliance with the [Hart-Scott-Rodino] Act’s requirements”.
Mr Buffett regularly boasts of Berkshire’s lean head office in his native Omaha, Nebraska, where 24 staff oversee a conglomerate which had net earnings of $19.5 billion last year. The business spans insurance, railroads, manufacturing, media and utilities and also runs a portfolio of shareholdings in publicly listed companies.
Berkshire’s most recent annual report singled the staff out for praise. “This group efficiently deals with a multitude of ... regulatory requirements, files a 23,000-page federal income tax return as well as state and foreign returns, responds to countless shareholder and media inquiries, gets out the annual report, prepares for the country’s largest annual meeting, coordinates the board’s activities — and the list goes on and on,” Mr Buffett wrote.
“They handle all of these business tasks cheerfully and with unbelievable efficiency, making my life easy and pleasant.”
— Financial Times
