Berkshire Hathaway has agreed to pay a $896,000 civil penalty in order to settle charges that it failed to give federal regulators advance notice before significantly increasing its stake in Chicago-based drywall maker USG last year.
Both the U.S. Department of Justice and Federal Trade Commission announced the settlement with billionaire Warren Buffett’s investment vehicle on Wednesday. The regulators said that Berkshire violated pre-merger reporting laws in December when it failed to provide advance notice before it exchanged $243.8 million of USG (USG) convertible notes for 21.39 million common shares, increasing Berkshire’s stake in USG to roughly 28% from about 15%. Regulators say the size of Berkshire’s increased stake was more than three times the minimum to require pre-transaction reporting.
What’s more, the FTC says the alleged violation came just a few months after Berkshire produced a similar violation when it increased its stake in financial services company Symetra Financial. The FTC chose not to punish Berkshire for that alleged violation, with the commission instead deciding to take Buffett’s firm on its word that it would comply with the Hart-Scott-Rodino Act’s filing requirements going forward.
“Although we may not seek penalties for every inadvertent error, we will enforce the rules when the same party makes additional mistakes after promises of improved oversight,” Deborah Feinstein, director of the FTC’s competition bureau, said in a statement. “Companies and individual investors alike should ensure that they have an effective program in place to monitor compliance with HSR filing requirements.”
Of course, the civil penalty amounts to little more than a slap on the wrist for Berkshire, which ranks fourth on the Fortune 500 list with more than $182 billion in revenue last year.