Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) doesn’t usually respond to criticism, preferring to explain its decisions in the company’s famous annual shareholders letter, but it seems that Mark Greenblatt at Scripps News has hit a nerve.
“Over a century ago, Mark Twain observed ‘Never pick a fight with people who buy ink by the barrel.’ We are about to ignore Twain’s sage advice,” the company wrote in a press release (via Yahoo Finance).
2020 Letter: Maverick Is Set To Take Advantage Of The Great Hedge Fund Unwind [Exclusive]
Short-sellers have been feeling the pain for months, but especially over the last two weeks. In his fourth-quarter letter to investors, Maverick Capital's Lee Ainslie pointed out the unprecedented levels stock prices have reached and why short-sellers have been hurting. Q4 2020 hedge fund letters, conferences and more High market caps Ainslie noted that Read More
Berkshire Hathaway asbestos claims
Warren Buffett started taking on asbestos liabilities some years ago with the idea that asbestos claims take a long time to play out, so even if all the money that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) takes in exchange for accepting liabilities eventually flows back out, the company will have profited by investing that money over the years. Greenblatt claims that the company has also started to “wrongfully delay or deny compensation to cancer victims and other to boost Berkshire’s profits.”
The problem is that Greenblatt leaves out information that would put his story in a different light. As one example, Greenblatt uses the sworn testimony of “former claims executive” Robert Burns to demonstrate that insurance adjusters are expected to hit certain settlement targets in order to get their bonuses. But Burns never worked for Berkshire; he worked for another company that Berkshire has done business with, and he left more than seven years ago.
Numbers being thrown around out of context
Greenblatt also fudges the math on some of the cases to make Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) look bad. In the case between Charles Lute and two other engineers against BMA Towers, he says that Berkshire Hathaway only offered to pay $26,000 per claimant when the case was actually settled at $500,000, which is true but misleading. Berkshire’s share of the liability was 27.1% of the claims, which the company assessed to be between $67,000 and $110,000 based on jury verdicts in similar cases.
Liberty Life settled the case at $500,000 over Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s objections and the two companies worked out a compromise that is subject to a confidentiality agreement, which Berkshire has offered to lift and Greenblatt has apparently not followed up on.
Greenblatt didn’t mention that Berkshire was only on the hook for about a quarter of the settlement or that it paid more than the $26,000 which is part of the public record. Leaving out those two facts makes it look like Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) paid 5% of what it owed, which simply isn’t true.
Berkshire Hathaway’s refutation continues in some detail, and when all the omissions have the same effect (making Berkshire look bad) you have to wonder if it was intentional. Greenblatt certainly has sentiment on his side – after all he’s talking about people who have legitimate legal claims. It’s a shame because reading through Greenblatt’s original article, it sounds like Berkshire Hathaway has used some sharp tactics in handling asbestos claims. But sharp tactics aren’t always illegal, and exaggerated claims ultimately don’t help rein in whatever bad behavior may exist.