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Honest Graft at Berkshire?

What, exactly, is the difference between what David Sokol did at Berkshire Hathaway:

Sokol, 54, bought about 96,000 Lubrizol Corp. (L) shares in January, less than two weeks before recommending the company as a target, Buffett said yesterday in a statement. Sokol had started confidential talks with Lubrizol the month before.

And what George Washington Plunkitt called, "honest graft"?

EVERYBODY is talkin' these days about Tammany men growin' rich on graft, but nobody thinks of drawin' the distinction between honest graft and dishonest graft. There's all the difference in the world between the two. Yes, many of our men have grown rich in politics. I have myself. I've made a big fortune out of the game, and I'm gettin' richer every day, but I've not gone in for dishonest graft--blackmailin' gamblers, saloonkeepers, disorderly people, etc.--and neither has any of the men who have made big fortunes in politics.

There's an honest graft, and I'm an example of how it works. I might sum up the whole thing by sayin': "I seen my opportunities and I took 'em."

Just let me explain by examples. My party's in power in the city, and it's goin' to undertake a lot of public improvements. Well, I'm tipped off, say, that they're going to lay out a new park at a certain place.

I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particular for before.

Ain't it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that's honest graft.

Categories > History

Discussions - 2 Comments

The difference is to be found in the laws which shape the nature of the game. Huge difference between what Sokol did and what Plunkitt suggests.

Honest graft is playing poker at the Bellagio in 2011, dishonest graft is playing poker at Tammany Hall, in the days of Plunkitt, or according to the accounts of Doyle Brunson, his "home games".

The movie Casino illustrates some of the difference. The proggressive narative on "honest graft" advancing scientifically, is more or less confirmed, at least according to the historical immagination of someone who thinks the movie "Casino" isn't pure fiction.

You can see Sam "Ace" who started out as an "honest grafter" eventually becomming more and more "honest" to the complete frustration of "Nicky". "Ace's" honesty also upsets the Clark County Commissioner, who reminds Sam that he is loosing his understanding of how business is really done. i.e. he shouldn't fire Donald Ward (that is just bad politics).

There are quite a few lawyers out there playing at being 16b vigilante's. Still it is quite possible that they are all hunting old slights of hand.

Whatever David Sokol did or didn't do, the "taint" attaches because he potentially violated a law that lawyers can sue on. The fact that he resigned is rather interesting. Since lawyers are more or less hamstrung by the law, they only really serve the function of drawing "integrity" distinctions within the scope of the law.

David Sokol is not really an example of "Honest Graft" at Berkshire. David Sokol is an example of running afoul of the law, and providing cover for the "Honest/Legal Graft" at Berkshire.

Granted David Sokol leaving, given an aging Buffet is a material event, but this can be emphasized and multiplied strategically within the "legal" framework, because there was potential "wrong doing" or the breaking of rules.

I dare you to look at the terms Buffett got from Goldman Sachs compared to the terms Treasury got from Goldman Sachs under TARP.

Buffett knew the government wouldn't let GS fail, he also potentially knew that if GS did fail, this would trigger a string of events that would put him on the hook for trillions in derivative losses. Buffett I think knew what the experts were going to tell Bush and Congress, and so he jumped in ahead of the bailout.

David Sokol is simply the victim of small ball rules designed to let lawyers provide a semblance of honesty to the system.

If you are running a Casino you have to crack down on small ball graft, because the legal game is already titled in your favor.

So rightness or wrongness is this case has only to do with law?

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