May

1

 Has any one commented on the subtle reasons that the accounting firm that made the audit report for Berkshire on the Sokol trading did not ask him one question or have one meeting with him before the report? There must be a legal reason for this. But to the layman, it would appear to be that they were afraid of having to report his response.

Henry Gifford comments:

An apartment house was built in Manhattan with parapets (those brick walls at the perimeter of the roof) which leaked so much water into the apartments they were removed and replaced at great expense. The architect was one of the people sued. The architect pointed out that the contractor did not build the parapets according to the plans, thus the architect was blameless, and was dropped from the lawsuit, and was not further involved in the next two removals and replacements of the parapets in further efforts to remedy the problem.

Perhaps the architect could have been asked to refund the fees paid for supervision of the work, but nothing more.

Numerous people hired to do designs in the construction industry advise never physically going to a construction site, thus there is no responsibility for defective work.

It would be interesting to know the physical location where the auditor's work was done, and to know if there are any standards of conduct that require a visit to an office, a visit to a business if the work exceeds a certain size (such as the business I once visited that looked very prosperous until I noticed the phone almost never rang), seeing originals of documents, seeing documents while no other parties are in the room, having documents in possession for a certain period of time before a report is due, or if all work can be done remotely based on copies of documents faxed over few minutes before the report is due.

Rocky Humbert writes:

The Chair writes: "…subtle reasons that the accounting firm … did not ask him one question or have one meeting…"

From a
partner of Munger Tolles & Olson (a very large corporate Law Firm (not accounting firm) which represents Berkshire):

"Mr. Sokol was interviewed at least three times regarding his Lubrizon trading activity and contacts with Citi bankers. In connection with the preparation of the audit committee report, a request for a further interview with Mr. Sokol was made to his attorney. Mr. Sokol was not made available."

On the advice of his attorney's, Sokol stopped cooperating. What's subtle about that?

Victor Niederhoffer writes: 

There's nothing funny about that. What's funny is how the attorney for Mr. Sokol said that "without the care and deceny to ask even a single quetion of Mr. Sokol". Only two lawyers or Sholem Aleichem could show how both lawyers could be right in what they say.

Rocky Humbert adds:

A little talmudic interpretation may help:

Sokol's lawyer wrote: "I am profoundly disappointed that the Audit Committee…would authorize the issuance of its report to the public without the care and decency to ask even a single question of Mr. Sokol."

This is semantic deconstructionism worthy of Bill Clinton's the meaning of "the".

Sokol's lawyer didn't say that the Board didn't ask him questions. It says that the board didn't ask him questions about the issuance of the report! 

Stefan Jovanovich writes:

Has no one heard the joke about the lawyer, the accountant and the engineer trapped on a sand bar surrounded by tiger sharks with the tide coming in– the one with the punch line of "Professional courtesy"? What else would 2 lawyers say? The R-Man is nearly infallible; but he is wrong about Charlie Munger's firm being "very large". In the world of bulk word carriers, it is not even a PanaMax.

That does not prevent MT&O from preserving its reputation for Janus-like integrity. Before we surrendered our tail fins as LA lawyers, Eddy's Mom and I used to play a game of identifying the local law firms by show tunes. From Day One MT&O was always matched with Kurt Weill's signature tune.
 


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