Yours truly, at right, 20 years ago during the time I was working for David L. Sokol,
then chief executive officer of Ogden Projects Inc.  

ex-boss – Buffett’s possible successor – provides inspiration during these times
by Tim Coco

Seeing my former boss in the news recently – upon his personal purchase of a 10 percent stake in a Virginia bank – brought back pleasant memories of working for this ethical, energetic and forward-looking man. More than that, the news reassured me that, even in this age of seemingly great corporate greed and disloyalty, rewards still come to those who conduct business responsibly and play by the rules.

David L. Sokol’s continuing story of ethical triumph is inspirational and worth sharing. He is chairman of MidAmerican Energy Holdings Company and, as Barron’s predicts, heir apparent to the helm of Warren E. Buffett’s Berkshire Hathaway Inc. In fact, this past weekend was Berkshire Hathaway’s famously intimate annual meeting in Omaha. From the time we worked together in the 1980s to the present, Sokol has smashed corporate business-as-usual stereotypes by successfully balancing responsible corporate governance, environmental stewardship and fair investment returns.

“Today the company is number one in the nation among regulated utilities in ownership of wind capacity… In our utility business, we spend all we earn, and then some, in order to fulfill the needs of our service areas. Indeed, MidAmerican has not paid a dividend since Berkshire bought into the company in early 2000. Its earnings have instead been reinvested to develop the utility systems our customers require and deserve. In exchange, we have been allowed to earn a fair return on the huge sums we have invested,” Buffett explains in his annual letter earlier this year. Berkshire owns 87.4 percent of MidAmerican and Sokol and two others own the balance.

simple beginnings for both of us

Sokol and I first met in 1982 while he was a civil engineer with the firm of Henningson, Durham and Richardson Inc. (HDR) of Omaha, and I was a reporter for the then-daily Haverhill Gazette. We were both in our 20s and both worked for companies from our respective hometowns. Sokol, who not long before was a Nebraska farm boy, had set up shop in a dingy office above the Tap restaurant in Haverhill. He had come to work with HDR’s client, Refuse Fuels Inc. (RFI), which then controlled an oil-fired power plant in Lawrence, Mass. It was also building on the banks of the Merrimack River in Haverhill a landfill and processing facility that would convert garbage into fuel for eventual burning in Lawrence.

I asked Sokol what he knew about a report of soot escaping from the stack of the Lawrence plant. He confirmed the story, explained the technical problem and pointed out the accident did not require state reporting, but that he did so as “a matter of good practice.” 

Over the next four years he had moved quickly but deservedly from HDR to assistant vice president at Citibank to CEO of Ogden Projects Inc., the waste-to-energy arm of the 50-year-old conglomerate, Ogden Corp. I had become a staff writer based at the Daily News of Newburyport, then part of Ottaway Newspapers, the local media group of Dow Jones & Co. Inc. Despite our different titles and employers, the topic of conversation had not changed.

RFI was insolvent because its collection of technologies was flawed. Sokol decided Ogden would bail it out in a maneuver that would have to balance stockholder interests against hefty spending – initially about $264 million – to prevent a looming environmental disaster. RFI would have failed without deep pocketed intervention, leaving no funds to maintain the landfill or protect the Merrimack River.

on the same payroll

At the end of 1987, Sokol hired me to assemble an internal community relations effort to gain resident understanding of the Haverhill project which had just been rejected by the local board of health. The Haverhill effort, ultimately successful, became a prototype to sell the two dozen other power plants Ogden was proposing throughout the country. Three examples among many during this time cemented my view that Sokol is sensitive, honest and ethical and that these were traits everyone should possess.

I was now largely based in Fairfield, N.J., but frequently visited various plants. It became clear to me during several visits to a particular plant that the facility was emitting pollutants in excess of requirements. Plant operators told me the plume from the stack was merely water vapor, but they didn’t know I had learned to read control room meters. What was happening – in power plant lingo – were “opacity excursions.” Unable to gain compliance from local operators or corporate department heads, I remembered Sokol’s “good practice” comment from years prior. Colleagues warned that if I were to approach the CEO directly, he would not act on my information and further be disturbed by my chain of command violation. Sokol, however, was grateful and rewrote the organizational chart on the spot.

During one holiday season, Sokol gave me $30,000 to distribute to local charities. There was one catch, however. He told me to resist my marketer’s urge to issue press releases or otherwise make any public mention of it.  It was a wonderful gesture during that uncertain time between the stock market crash and eventual recession.

Finally, after the Haverhill plant went online, neighbors reported unusual humming noises. While most power plants use water for cooling, Ogden was forced to erect huge fans since local officials vowed to block any plans to use water. It was suspected that altering the shape or angle of the fan blades might reduce noise. Acting haphazardly, however, might increase noises or help neighbors in one direction at the expense of residents in another. To gain residents’ trust, Sokol put $50,000 in a citizen-controlled bank account and urged them to hire their own independent consultant whose advice the company would honor.

ending over-the-top perks

By 1991, Sokol and I had both moved on – he became CEO of San Francisco-based California Energy Co. and I opened COCO+CO. Whatever inspiration Sokol provided during the time we worked together would be far exceeded as we built new careers near the end of the millennium.
 
At CalEnergy, Sokol replaced founder and chairman Charles T. Condy who, according to Business Week, “spent nearly $2.5 million a year on a Falcon 20 jet, a Bentley, and 15 other luxury cars for top executives – hefty perks for a small geothermal-energy producer.” Sokol sold the corporate jet, cut costs 40 percent and settled battles with other investors. The company’s stock price and prestige rose dramatically.

Sokol left the top spot at CalEnergy in 1992 – temporarily as it turns out – to become president and chief operating officer of JWP Inc. of Purchase, N.Y. Sokol became suspicious of the JWP’s accounting practices, brought in his own auditors and actually blew the whistle on overstated profits. At first, he was rebuffed by the company’s board. “It really is amazing how many upstanding people will ask you to do something wrong,” Sokol later told the New York Times . He explained directors feared only about being embarrassed.

Back at CalEnergy, the company grew through acquisitions to become MidAmerican Energy Holdings Company in 1999. A year later, the publicly traded company went private, acquired by an investor group including Berkshire Hathaway Inc. Today, MidAmerican is involved in generation facilities capable of producing more than 21,500 megawatts of electric power. “Approximately 24 percent of that power comes from noncarbon, renewable resources such as geothermal, wind and nuclear,” the company reports.

Meanwhile, Sokol had long been married with two children. Personal tragedy struck the family when his son DJ was diagnosed with Hodgkin’s disease and passed away two weeks after graduating from high school.

In 2004, he was inducted into the Horatio Alger Association of Distinguished Americans. The organization honors “the achievements of outstanding individuals in our society who have succeeded in spite of adversity” and encourages “young people to pursue their dreams through higher education.” He is also a member of the National Collegiate Athletic Association (NCAA) Leadership Advisory Board.

now, the bank goes to him for money

Last month, Middleburg Financial Corporation, owner of Middleburg Bank, entered into a stock purchase agreement in which it agreed to sell 454,545 shares of the bank’s common stock to Sokol for $5 million. In a filing with the Securities and Exchange Commission, Middleburg said that despite being well capitalized, “the additional capital from Mr. Sokol will give it a number of options as it continues to work through the current economic cycle.”

Sokol recently wrote “Pleased But Not Satisfied,” a book outlining his principles aimed at developing future leaders. During these times of corporate excesses, greed and fraud, it is reassuring to know that success is still possible the old fashioned way – through hard labor and ethical conduct.

Thank you David for reinforcing my instincts!

Tim Coco is president and chief executive officer of COCO+CO. Inc. The company provides strategic corporate communications with an emphasis on brand consistency across media. COCO+CO. works with businesses in the financial services, quasi-public and energy efficiency sectors. COCO+CO. may be reached at (800) 374-4103 or on the World Wide Web at www.cocoboston.com.

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