Bloomberg has reported that a former manager at Forest River, a Berkshire Hathaway subsidiary, has sued the company claiming wrongful termination.  Forest River, founded in 1996 by Peter Liegl, is a manufacturer of recreational vehicles.  The company was acquired by Berkshire in 2005.  Warren Buffett had the following to say about Peter Liegl in his 2005 letter to shareholders:

Pete is a remarkable entrepreneur. Some years back, he sold his business, then far smaller than today, to an LBO operator who promptly began telling him how to run the place. Before long, Pete left, and the business soon sunk into bankruptcy. Pete then repurchased it. You can be sure that I won’t be telling Pete how to manage his operation.

Brad Mart, former head of Forest River’s financing division, claims that he was promised the CEO position upon the retirement of Mr. Liegl.  Among other allegations, Mr. Mart claims that Mr. Liegl stole cash from factory vending machines, forced the company to purchase overpriced supplies from a company he owns, maintained “ghost employees” on the payroll, and required employees to use his airline charter service for business travel.  Mr. Mart states that he alerted Warren Buffett of this behavior in six separate phone conversations.

Berkshire Secretary Forrest Krutter has investigated the allegations at Mr. Buffett’s request and found no indication of fraudulent, unethical, or illegal activities.  Furthermore, Mr. Krutter stated that Mr. Mart never alerted Mr. Buffett regarding any of these activities and Mr. Mart’s employment was terminated for reasons unrelated to the claims in the lawsuit.

Warren Buffett has long been known for demanding the highest level of ethical conduct from managers and the Berkshire ethics policy prohibits any retaliation for whistle blowers.  Furthermore, no possible motive would exist for Mr. Buffett to cover up allegations of impropriety at Forest River given that he is the largest victim of the alleged theft due to his economic interest in Berkshire.

Disclosure:  The author owns shares of Berkshire Hathaway and is the author of The Rational Walk’s Berkshire Hathaway 2010 Briefing Book which provides a detailed analysis of the company along with estimates of intrinsic value.

Forest River Manager Sues Berkshire For Wrongful Termination
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