OMAHA, Neb. – A lawyer for the billionaire Haslam family called bribery allegations by Warren Buffett’s company a “wild fabrication” Thursday.
But a judge didn’t immediately rule on whether those allegations will be resolved at a January trial that will help determine the multibillion-dollar price Berkshire Hathaway may have to pay the Haslams for the rest of the Pilot truck stop train.
The Haslams and Buffett’s company are accusing each other of manipulating Pilot’s earnings this year to affect the price Berkshire would have to pay for the Haslams’ remaining 20% stake in the company if the family decides to sell.
The Haslam family – which includes Cleveland Browns owner Jimmy Haslam and former Tennessee governor Bill Haslam – accused Berkshire last month of trying to understate Pilot’s earnings this year by changing its accounting practices.
Berkshire responded this week with a lawsuit of its own, accusing Jimmy Haslam of trying to bribe key Pilot executives with payments several times their annual salaries to inflate the company’s profits.
“We called Berkshire’s allegations wild inventions in our opposition brief,” said Anitha Reddy, the lawyer representing the Haslams. “I don’t think we could have been clearer that we dispute them. And if there’s any doubt in Berkshire’s mind, we think they’re false and we intend to defeat them on whatever schedule the court orders.”
The judge promised to rule by the end of the week on whether Berkshire’s claim can be heard at the same time as a trial on Pilot’s original claim, which is scheduled for January. Berkshire wants the court to prevent the Haslams from exercising their option to sell the rest of the company to Berkshire next year because it says there are so many doubts about the accuracy of Pilot’s 2023 earnings. Even if the judge agrees, the Haslams would still have the option to sell in future years under the agreement they signed in 2017.
Berkshire’s lawyer Craig Lavoie argued that it’s crucial to block a sale next year because it will be difficult to determine how much Pilot’s earnings have been affected by the alleged bribes. He said Berkshire believes at least 28 executives – many of whom are involved in buying and selling fuel for the nation’s largest truck stop chain – were offered bribes.
Berkshire said in its lawsuit that it only learned a few weeks ago of the Haslams’ attempts to bribe executives who used to work for the family at the company Jim Haslam – Jimmy and Bill Haslam’s father – founded before Berkshire became majority owner earlier this year. One executive who was promised a bonus revealed it to Pilot’s current CEO, Berkshire said.
Lavoie said it’s difficult for Berkshire to know what short-term decisions those executives may have made because of the bonuses.
“Mr Haslam’s side deals have forced the company to investigate and interview many of the key people it relies on today to run the company,” Lavoie said.
When Berkshire bought its initial 38.6 per cent stake in Pilot in 2017, it paid $2.758 billion. This year it paid a further $8.2 billion, giving it control of 80% of the company, and installed a new CEO and chief financial officer. Buffett told Berkshire shareholders this spring that he wished he could have bought the whole company all at once because the price was better in 2017, but the Haslams didn’t want to sell it all then.
The Pilot chain, which has more than 850 locations and about 30,000 employees in the US and Canada, has already provided a significant boost to Berkshire’s revenues and profits this year.
The Haslams said Berkshire’s decision to switch to so-called “pushdown accounting” this year had forced Pilot to take higher depreciation and amortisation charges, resulting in lower net income. The Haslams were outvoted on this change at Pilot board meetings.
In addition to Pilot, Berkshire owns an eclectic assortment of other businesses, including Geico insurance, BNSF railroad and several large utilities, as well as a number of smaller manufacturing and retail companies. It also has a large portfolio of stocks, including large stakes in Apple, Coca-Cola, American Express and Bank of America.
