As a result, according to the findings of an American arbitration panel, Precision Castparts, a Berkshire Hathaway subsidiary, paid 800 million euros, or $870 million, for a company that was worth only about one-fifth that price.
The acquisition of the company, Wilhelm Schulz, was an expensive misstep for Mr. Buffett’s holding company, which has also been hit hard by the pandemic. Early in May, Berkshire Hathaway reported a loss of almost $50 billion in the first quarter as lockdowns and the economic downturn took a toll on the company’s portfolio of airlines and financial firms.
The case also dents the mythos of the Mittelstand — the midsize manufacturing companies that underpin the German economy. German prosecutors have opened a criminal investigation focusing on eight suspects at Wilhelm Schulz, all of them former high-ranking executives, finance officials or information technology specialists. None have been charged.
The investigation was reported earlier by the Handelsblatt newspaper.
The circumstances that allowed Mr. Buffett’s organization to be tripped up by a little-known German manufacturer were detailed by the arbitration panel that considered a complaint filed by Precision Castings, which is based in Portland, Ore. The tribunal found that Wilhelm Schulz executives and employees had “engaged in a pervasive scheme” to conceal the company’s dire financial condition so that Precision Castparts would go ahead with the acquisition.
“This is not a close case,” the tribunal found. “The evidence strongly points to fraud, and there is little in the record to suggest otherwise.”