Buffett's Berkshire countersues billionaire Haslams in battle over Pilot valuation

Warren Buffett's Berkshire Hathaway has accused billionaire Jimmy Haslam of promising secret payments to staff that would inflate the price Berkshire would have to pay for the Haslam family's 20% stake in truck stop operator Pilot Travel Centers.

Berkshire made the accusation in partially redacted filings made public on Tuesday in a countersuit against the Haslam family in Delaware Chancery Court, where the Haslams have been suing Buffett's company over Pilot.

Lawyers for the Haslams did not immediately respond to requests for comment. Jimmy Haslam also owns the Cleveland Browns football team.

In a complaint last month, the Haslams accused Omaha, Nebraska-based Berkshire of changing its accounting for Pilot to depress the business's profit, which is used to set the price Berkshire would owe if the family exercised a put option to sell its 20% stake early next year.

Berkshire's countersuit seeks an injunction blocking the Haslams from exercising their option in 2024 or distorting Pilot's results through unauthorized payments to employees. Berkshire paid $11 billion for its 80% Pilot stake in 2017 and early 2023, and according to Pilot estimated that the other 20% would be worth $3.2 billion without the accounting change.

In its countersuit, Berkshire said it learned this month that Jimmy Haslam had as early as March devised a scheme to secretly promise "massive side payments" to high-level Pilot employees, in order to inflate short-term profit at the Knoxville, Tennessee-based business.

Berkshire said it believes the promised payments affected the employees' day-to-day decision-making, giving them incentives to make short-term decisions that would boost the Haslams' profit at the expense of Pilot's long-term value.

It also said Haslam then hid those payments, including from its National Indemnity Co unit, known as NICO.

"By secretly distorting the incentives of [Pilot] employees for personal gain, Haslam breached the fiduciary duties he owes to [Pilot] and NICO," Berkshire said.

"Haslam's outrageous and illegitimate scheme has harmed and threatens to further harm [Pilot] and, by extension, NICO and Berkshire," it added.

Berkshire said it became aware of the payments in a routine meeting in early November with Pilot Chief Executive Adam Wright, where another senior Pilot executive said: "I know there is a narrative out there that I have a side deal with Jimmy."

The number of executives who allegedly received payment offers was redacted.

Jimmy Haslam is worth $8.8 billion according to Forbes magazine.

The family also includes former Tennessee Governor Bill Haslam, and Jimmy's father, Jim Haslam, who founded Pilot.

A trial in the Haslams' lawsuit is scheduled to begin in January, and Berkshire wants its claims tried at the same time. The judge overseeing the case is expected to discuss scheduling at a Nov. 30 hearing.

The case is Pilot Corp v Abel et al, Delaware Chancery Court, No. 2023-1068-MTZ.