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Buffett Applauds Wall St. Settlement

The billionaire investor calls deal 'a step in the right direction.' He also will consider candidates to succeed him as CEO of Berkshire Hathaway.

May 05, 2003|From Times Wire Services

OMAHA — Warren Buffett, the billionaire investor, Sunday called the $1.4-billion settlement between regulators and 10 securities firms accused of publishing misleading stock research "a step in the right direction" because it sheds light on abuses on Wall Street.

"It tells the firms that somebody is watching them," he told reporters. "Big shots don't like to be on the front pages of the papers."

The settlement, which alleged that Citigroup Inc., Credit Suisse First Boston, Merrill Lynch & Co. and seven other firms touted stocks to win investment banking business, was the biggest ever for alleged securities law violations.

Buffett, chairman and chief executive of Berkshire Hathaway Inc., also said he will meet with the board today to weigh the merits of four candidates who may succeed him as CEO.

"I will tell them what I think the strengths and weaknesses are of the four candidates," the 72-year-old Buffett said. He did not name the four or say whether they work for the company.

On Saturday, Buffett told shareholders at Berkshire Hathaway's annual meeting that the conglomerate made record operating profit of $1.7 billion in the first quarter, more than twice that of the year-ago quarter, helped by a jump in earnings from its insurance businesses.

"It's the best earnings we've ever had," Buffett told more than 15,000 shareholders packed into Omaha's Civic Auditorium. Berkshire Hathaway, which made a record annual operating profit of $3.9 billion in 2002, is scheduled to report first-quarter results Friday.

Buffett also said the company will name new independent directors to comply with corporate governance rules.

"We will add outside directors and it will be done before the deadline," he told reporters. "It's just a matter of finding ones that meet our requirements. There aren't that many out there, but we'll find them."

Berkshire's seven-member board includes Buffett's wife, Susan; his 48-year-old son, Howard; and three executives who have business ties to the company. Lawyers and corporate governance experts have said that Buffett probably will have to add at least two outside directors to the board to comply with new rules proposed by the New York Stock Exchange.

The three executives with business ties are Vice Chairman Charles Munger, 79, the CEO of Berkshire-owned Wesco Financial Corp; Ronald Olson, 61, a senior partner at law firm Munger, Tolles & Olson; and Walter Scott Jr., 71, who owns a controlling stake in Berkshire's MidAmerican Energy Holdings Co. investment.

The California Public Employees' Retirement System, owner of 6,000 Berkshire Class A shares, will vote against the election of Buffett's wife, his son, Olson and Scott because of conflicts of interest, CalPERS spokesman Brad Pacheco said.

Buffett has amassed a fortune of more than $30 billion, buying stakes in companies such as Coca-Cola Co. and American Express Co.

Berkshire Hathaway, with a market value of $108 billion, increased profit fivefold last year to a record $4.29 billion.

Bloomberg News was used in compiling this report.

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