Warren Buffet\'s firm might sue former executive

Sokol, who resigned as one of Berkshire\'s top executives in March after a scandal broke over his private investments, "violated company policies" and "violated the duty of candor" he owed the company, an audit committee report said.

It said the company might still sue over any damages it perceives from the case, including going after Sokol\'s trading profits.

The report, released just days before Berkshire\'s annual shareholder convention in Omaha, Nebraska, moved to clear away questions over Sokol\'s trading in $10 million in shares of Lubrizol ahead of Berkshire\'s $9.0 billion March takeover of the company.

While an earlier statement said Sokol\'s resignation was personal and had nothing to do with the trades, the issue has put cracks in the $372 billion investment house\'s well-crafted image of financial rectitude.

It also highlighted the much-asked question of who would eventually succeed 80 year old Buffett, known to investors as the "Oracle of Omaha" for his investment acumen.

Based on the data available, Sokol could have racked up $3 million in personal gains on the Lubrizol deal.

But until Wednesday\'s statement, his and the company\'s position was that the investment was done at arms-length, without the knowledge that Berkshire would ultimately buy Lubrizol.

The audit board, though, said the timing of Sokol\'s personal investment and his involvement in suggesting Lubrizol as a takeover target for Berkshire were clear violations of company policies.

"It was not for Mr. Sokol to decide whether buying $10 million worth of Lubrizol stock might distort his judgment as a representative of Berkshire Hathaway. That was a decision for the Audit Committee to make," it said.

Even if Sokol\'s trades adhered to the word of the company\'s code, the report said, "it could not be reconciled with the obligation to stay well within the lines."

"By engaging in such questionable conduct, Mr. Sokol threatened Berkshire Hathaway\'s reputation -- or would have done so had he remained with the company."

The audit board said it could still take action to recover Sokol\'s trading profits or any other damage to the company.

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