05/01/2011 06:05 pm ET | Updated Jul 01, 2011

Give Warren Buffett a Break and Fight the Real Enemy

Yesterday, 40,000 Berkshire Hathaway shareholders gathered in Omaha, Nebraska for the holding company's annual shareholder meeting. But a dark cloud hung over the gathering, which is usually so jovial that it's been dubbed "Woodstock for Capitalists."

On March 28th, David Sokol, heir apparent to Berkshire CEO Warren Buffett, resigned from his position at Berkshire Hathaway citing "personal reasons." But instead of the perfunctory half-page press release praising Mr. Sokol's leadership and wishing him well, the resignation was announced via a two-page letter from Warren Buffett.

What came as a surprise to many, the second page of that letter provided background on the Berkshire Hathaway acquisition of chemicals company Lubrizol and exposed that Mr. Sokol had purchased a block of shares while he was advising Berkshire to acquire the company (yesterday, Mr. Buffett took the blame for not asking Mr. Sokol when he purchased the shares).

Since his resignation, an audit committee report from the company's board has been released that states that Mr. Sokol not only violated internal insider trading policies (Berkshire's standards are much higher than is required to violate the law), but also Berkshire's company code of ethics.

The report also accused Mr. Sokol of not being forthcoming on a number of matters related to the Lubrizol transaction; including somehow forgetting to inform Mr. Buffett that the only reason he suggested that Berkshire Hathaway acquire Lubrizol was due to advice from Citibank's investment bankers about possible acquisitions that Berkshire could make.

Mr. Sokol should be ashamed of himself. He has not only done damage to Berkshire Hathaway, its shareholders, but also anytime an executive of a public company doesn't follow basic ethical standards, it damages the confidence investors and consumers have in our financial system.

Mr. Sokol's actions have also unfairly impugned the reputation of Berkshire Hathaway CEO Warren Buffett.

Since his resignation, members of the press and bloggers who cover the financial industry have castigated Buffett for a myriad of offenses ranging from his lack of ethical standards, his age, and they have even gone after his investment performance.

Some of the headlines:

"Warren Buffett's Mistake: How the Saint of Capitalist Damaged His Reputation"

"Berkshire Board Tries Cleaning Up Buffett's Mess"

"The Buffett Judgment Question"

"America's Turning Against Ol' Warren Buffett"

The same reporters and analysts also spent a great deal of time going after Buffett in 1999 for not jumping on the high-tech bandwagon and spent virtually no time looking into why he thought it was foolish to invest in an extremely over-valued sector.

I am not saying that those who manage public companies should be not be held to the highest of standards. But I must say the tone that the press has taken towards Mr. Buffett was largely absent during the financial crisis of 2008 when financial executives nearly obliterated our economy through years of fiscal misdeeds.

Let's remember how Berkshire, under Mr. Buffett's leadership, reacted to the Sokol affair.

A press release announcing Mr. Sokol's resignation offered a background on the basis of his resignation. It was not brought out by an investigative reporter, not through congressional hearings where Mr. Buffett had to be harangued by a member of Congress, nor an FBI or SEC investigation. Mr. Buffett elected to expose the information voluntarily. After his resignation, there was an exhaustive and detailed audit report released. What else could Buffett have done?

It is clear that he was not aware of Mr. Sokol's actions (I think most people agree on that fact). Can he be accused of a sin of omission by not asking when Sokol purchased his shares? Perhaps. But that is hardly worthy of the punishment he has received by the press.

Warren Buffett has, over the 60 years of his career, proven himself to be a principled and honest investor. He has spent his life's work working tirelessly to improve confidence in our financial system. And he has often been the first to sound the alarm, often years in advance, when investors are being fooled by Wall Street, as he did in 2003 when he called derivatives "Weapons of Mass Financial Destruction".

What is this all about? Some say that because Mr. Buffett has always had a sterling reputation that he should be held to the highest of standards -- perhaps even higher than those of other executives; and that when he does falter, he must be held accountable for his actions.

I don't disagree. Should the SEC look into this matter? Yes. Should Mr. Buffett be accountable to his shareholders like any other CEO? Absolutely.

After having to watch virtually unrepentant financial industry executives lie in hearing after hearing during the investigation in the 2008 economic crisis, why are we wasting all of our energy to go after someone who has done everything to instill confidence in our financial system, and has been a paragon of the highest ethical standards? Because one of his executives committed ethical violations, on his own, that were voluntarily exposed?

We can't be in the business of throwing the baby out with the bath water. Let's focus on the real enemy. It certainly isn't Warren Buffett.