Shareholder challenges Buffett's PetroChina stake

Wed Mar 14, 2007

By Jonathan Stempel

NEW YORK (Reuters) - A Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research)(BRKb.N: Quote, Profile , Research) shareholder plans to challenge Warren Buffett's decision to maintain an investment in PetroChina Co. (0857.HK: Quote, Profile , Research) amid claims the Chinese oil company's parent invests in Sudan.

Judith Porter, an Ardmore, Pennsylvania resident who owns 10 Class "B" Berkshire shares, plans at the company's May 5 annual meeting to seek shareholder approval of a resolution barring Berkshire from investing in foreign companies whose activities would be prohibited for U.S. companies by Presidential order.

If adopted, the resolution could force Omaha, Nebraska- based Berkshire, an insurance and investment company, to divest from PetroChina. Its introduction may add some controversy to Berkshire's annual meeting, which more than 20,000 shareholders attend and which is typically not confrontational. Berkshire is PetroChina's largest foreign investor.

Some pension funds and universities, including Harvard University, have divested from PetroChina because of the alleged link with Sudan, which the United States has accused of letting genocide occur in the western Darfur region. Sudan's government has denied that charge.

"President Clinton and President Bush have declared it's not in the U.S. national interest for U.S. companies to engage in certain business in Sudan," said Gerald Porter, the husband of Judith Porter, in an interview. "Mr. Buffett is a very smart man and we invested in Berkshire Hathaway for financial reasons. He has the opportunity to use his influence to stop the killing."

In its proxy filing with the U.S. Securities and Exchange Commission, Berkshire said: "We admire the motives of the proposer, but we do not agree with the logic of her proposal."

According to the proxy, Berkshire executive officers and directors control 36.7 percent of the company's voting power. Buffett, the world's second-richest person, controls 33 percent himself. He again took a $100,000 salary to run Berkshire last year, when profit rose 29 percent to $11.02 billion. PetroChina's government-owned parent, China National Petroleum Corp., has a 41 percent stake in Petrodar Operating Co., whose main office is in Khartoum, according to Petrodar's Web site.

Berkshire has said conditions in Sudan are "deplorable and sympathizes with people who want to remedy them."

It has also said, though, that it has not seen records showing that PetroChina operates in Sudan and should not divest automatically because it disagrees with a specific activity. It has also said divesting would not improve Sudanese behavior.

"Subsidiaries have no ability to control the policies of their parent," it added.

Buffett, 76, is worth $52 billion according to Forbes magazine. Last year he won wide praise for donating most of his wealth to the Bill & Melinda Gates Foundation.

Admirers praise Buffett for his investing prowess and plain-spoken manner. Buffett calls Berkshire's annual meeting and related events "Woodstock for Capitalists."

Debbie Bosanek, Buffett's assistant, said Berkshire is "looking forward" to discussing Judith Porter's proposal, although it had won an SEC ruling not to include it in the proxy.

"Buffett, independent of that, said 'let's do it anyway,'" Gerald Porter said. "He welcomes a full and thorough discussion at the meeting, which I think is a wonderful thing."