Warren Buffett Gets Conned

Warren Buffet Gets Conned

Do you know Berkshire Hathaway? If you know them, then you know that they are owned by the legendary investor Warren Buffett, who is trying to collect companies like a regular person would collect stamps or coins.

Berkshire Hathaway was on a shopping tour around 2016/2017 and they identified a pipe manufacturing company named Wilhelm Schulz. The company was based in Krefeld, which happens to be the sister city of Charlotte, North Carolina. Schulz was interested in selling but was close to insolvency. A few days before they started to negotiate with Berkshire Hathaway, a local advisor concluded that Schulz should go the insolvency route. 

However, when Berkshire Hathaway was interested in the company, they received data that may have been photoshopped which showed purchase contracts which pushed the company’s value up significantly. Berkshire Hathaway bought the company for $800 million and now want to be awarded an arbitration to reclaim the funds lost in the purchase.

Two interesting concepts came from this. First, in parallel, Berkshire Hathaway filed a lawsuit in Germany for $800 million. This means that the court fees alone would cost them $380 thousand. This shows that Berkshire Hathaway is really out for the grabs. The second interesting concept is that Berkshire Hathaway won in arbitration but Shulz decided to file in the United States in accord against the arbitration award. 

Traditionally, we lawyers say that if you win an arbitration you cannot have this matter heard in court again. But, what we have now is that both parties, plaintiff and defendant filed parallel actions in court, so arbitration may be negotiated in a contract, but in reality, the courts may decide, or the courts may decide not to hear the case because they have a binding arbitration agreement. 

However it develops, it remains an interesting matter, and for those who are just interested in the very quick top view, maybe it is best not to mess with Berkshire Hathaway.

From: Morning Musing 206 

By: Reinhard von Hennigs, Chairman and Founder of BridgehouseLaw LLP

Published: June 9th, 2020

Best regards
und viele Grüße aus Charlotte
Reinhard von Hennigs