Buffett’s Salomon Report Contains Many Positives
Warren E. Buffett, the Wizard of Omaha, wore them down as much as he wowed them when he met with analysts and institutional investors on Friday to sketch out Salomon Inc.’s road to recovery from last year’s Treasury securities auction scandal.
“I don’t want you to leave this room with an unanswered question,” Salomon’s interim chairman said as he opened the 2 3/4-hour session. True to his word, Buffett and his top managers kept the meeting going as people dribbled out until all questions--and questioners--were exhausted.
He said he expects government investigations of the scandal by the Federal Reserve, the Treasury, the U.S. attorney and the Securities and Exchange Commission to be finished in the next few months.
“We cannot predict what the resolution will ultimately be . . . and we cannot rule out the possibility of criminal charges,” added Robert E. Denham, Salomon’s chief legal counsel.
Salomon has admitted that it submitted illegal bids in several Treasury auctions last year in an attempt to “corner” the market. The misdeeds were compounded when the firm’s former top officers failed to promptly report the problems to the government.
In other highlights, Buffett said:
* Reports of a “brain drain” to competitors of Salomon’s top producers are exaggerated.
* Salomon has “absolutely no plans” to sell or spin off Phibro Energy.
* Salomon’s balance sheet is “better understood and more liquid than at any time in our recent past.”
* Salomon will no longer take risky, long-term multibillion-dollar stock market positions, as it has in the past.
* While still facing uncertainties, the investment banking firm retains good earnings power.
* Pay for the firm’s top 150 officials will more closely track their performance, with the most highly paid being compensated partly in stock.
Buffet, chairman of Berkshire Hathaway, said he will stay at Salomon until government charges--but not 44 pending civil suits--”are dealt with.” He added: “I have hopes that I’m playing the back nine at this point.”
