Warren Buffett, the CEO and chairman of
Berkshire Hathaway Inc.
), has agreed to pay a penalty of $896,000 to settle claims
asserted by the U.S. Department of Justice (DOJ) and Federal Trade
Commission (FTC). The claim states that the company violated the
reporting requirements of the Hart-Scott-Rodino Antitrust
Improvements Act (HSR Act) by failing to report the acquisition of
an additional stock of USG Corporation (USG) as part of the
exchange of convertible notes in Dec 2013.
The HSR Act necessitates parties to file a notification with the
regulatory bodies, and observe a waiting period prior before
effecting such transactions. The waiting period is maintained to
enable DOJ and FTC to investigate whether a probable transaction
would considerably lessen competition, and accordingly be given the
green light or investigated and challenged.
Zacks Rank #3 (Hold) Berkshire had gained approximately 28%
control in the building products company USG Corporation in Dec
2013, when it exchanged $243.8 million of USG convertible notes for
21.4 million common shares, valued at more than $950
The facts of the case suggest that Buffett failed to comply with
the HSR-Act on a technical basis (the deal size of $950 million
exceeded more than 3 times the HSR threshold level exempt for
filing) and not that he acted fraudulently or with any intent to
misrepresent his position in the stock. However, the FTC
referred the matter to the Department of Justice (DOJ) for
prosecution likely on the grounds of the matter being in the public
Buffett: Second Time Offender
It is significant that this violation was the second offense by
Buffett. Previously, he had failed to file a HSR notification in
connection with a Jun 2013 transaction, in which it acquired
additional shares in Symetra Financial Corp. (
) worth $41 million by exercising options. However, FTC did not
impose penalties for the first violation.
Other Companies Facing Action
This action by the regulatory agencies sends a strong signal to
other companies about the risks of even an inadvertent failure to
file. In Sep 2012, FTC fined Biglari Holdings, Inc. (
), $850,000 to settle allegations of violating the HSR Act in
connection with acquisition of shares of Cracker Barrel Old Country
Store, Inc. in Jun 2011.
In 2011, the FTC announced that a $500,000 civil penalty was
imposed on Brian L. Roberts, the chief executive officer of Comcast
), for his personal acquisition of additional shares of
without complying with the HSR Act.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
BIGLARI HOLDING (BH): Get Free Report
COMCAST CORP A (CMCSA): Free Stock Analysis
SYMETRA FINL CP (SYA): Free Stock Analysis
COMCAST CLA SPL (CMCSK): Get Free Report
To read this article on Zacks.com click here.