LIABILITY

John Coffee, a Columbia University law professor, called the disclosure "embarrassing" for Berkshire.

"It's the kind of behavior that, as a matter of corporate governance, sophisticated companies try to avoid," he added.

Legal experts were divided on whether Sokol could be held liable in court for his actions.

"He could be. At a minimum he showed extremely bad judgment in not disclosing to Mr. Buffett that he had taken a fairly significant position in the company a week before he pitched the benefits of the company to Mr. Buffett," said C. Evan Stewart, managing partner at law firm Zuckerman Spaeder LLP in New York who concentrates on securities litigation.

But others said there was the possibility the sequence of events could be explained away.

"The legal issue is, 'what did Sokol know about Berkshire's interest in acquiring a position in Lubrizol when he was buying shares in January,'" said Stuart Slotnick, a partner at Buchanan Ingersoll & Rooney in New York.

"Warren Buffett's job is to purchase stock and companies. If Sokol goes to Buffett and says, 'I love this stock, I bought some for myself, you should look at it,' there's nothing inappropriate in Buffett doing his own analysis and making a purchase, as long as no trading decisions are made on the basis of material, nonpublic information."

One securities lawyer, who spoke on condition of anonymity because his firm does not permit staff to speak to the media publicly, said he could "see reasons for Buffett to be annoyed" but did not see a crime in what happened.

"ENORMOUSLY TALENTED"

Most Buffett watchers thought Sokol was the top candidate of the three or four Berkshire executives most frequently mentioned as future CEOs of the company, given the legendary investor's enthusiasm for him.

In his annual letter to shareholders this year, Buffett praised Sokol for engineering a turnaround at NetJets, a business where he had no prior experience, and for his accomplishments at MidAmerican.

A year earlier, he called Sokol "an enormously talented builder and operator," and in 2009 he proclaimed that Sokol would run any business with which he was associated "in a first-class manner."

The issue of succession is crucial for Berkshire Hathaway because Buffett personifies the company. He built Berkshire up from a small insurance company to one of the largest insurers and conglomerates in the United States over decades.

Berkshire did not release Sokol's March 28 letter of resignation, though Buffett said that in the letter Sokol had mentioned his desire to pursue philanthropic efforts.