Warren Buffett’s
Berkshire Hathaway agreed last week to pay a $896,000 penalty for not informing regulators of a $325 million investment in wallboard maker USG Corp.
Because of the size of the deal, the Federal Trade Commission said Berkshire should have notified the Justice Department before converting the senior USG notes into 21.4 million shares of the company. Antitrust laws required Berkshire go through regulatory hoops due to its status as an existing shareholder in USG—it already held 39 million shares in the company as of June.
This is not the first time Berkshire has failed to notify regulators of its actions. Earlier in the year, when the insurance giant acquired securities in Symetra Financial Corp., it did not make the deal known.
That repeated action was key to the FTC’s decision to fine Berkshire, said Director of the Bureau of Competition Deborah Feinstein.
“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,” Feinstein told the Associated Press. “Companies and individual investors alike should ensure that they have an effective program in place to monitor compliance.”
Buffett issued a statement last week in which he described the oversight as “a simple mistake.”
“This event triggered a filing requirement for Berkshire and we were late in recognizing that fact,” he said.
Berkshire corrected the initial filing after the USG investment and said it should have notified officials.
KBW analyst Meyer Shields told the AP he believes Buffett’s explanation, and that the continued errors are indeed honest mistakes. However, an ongoing pattern may mean Berkshire’s compliance systems aren’t keeping up with regulations.
