NEW YORK (Reuters) – A U.S. judge on Wednesday confirmed a 643 million euro ($734 million) arbitration award favoring a unit of Warren Buffett’s Berkshire Hathaway Inc <BRKa.N> that claimed it was fraudulently induced to buy an ailing German pipemaker that inflated sales to look profitable.
U.S. District Judge Lewis Liman in Manhattan said an arbitration panel employed “sound” reasoning in ruling against Schulz Holding GmbH, which sold U.S. and German businesses to Berkshire’s Precision Castparts for 800 million euros ($913 million) in 2017.
Schulz’s U.S.-based lawyers did not immediately respond to requests for comment.
“We intend to move swiftly to enforce the court’s well-reasoned judgment,” Precision spokesman David Dugan said in an email.
The Schulz purchase was a rare misstep for Buffett’s conglomerate, whose $32.1 billion acquisition in 2016 of Precision, which makes aircraft and industrial parts, remains its largest.
Precision, based in Portland, Oregon, accused Schulz of using backdated orders and fake invoices to inflate revenue and profit, when the Krefeld, Germany-based company was actually teetering near bankruptcy.
It estimated that the businesses it bought were worth no more than 157 million euros.
In its April 9 ruling, the New York arbitration panel said Schulz engaged in a “pervasive scheme” to mislead Precision.
“This is not a close case,” the panel said. “The evidence strongly points to fraud, and there is little in the record to suggest otherwise.”
Schulz claimed that the panel should have dismissed Precision’s fraudulent inducement claims, and accounted improperly for claims the companies had settled.
It has also argued that the businesses it sold were worth more than 800 million euros.
Precision has struggled during the coronavirus pandemic, and laid off some workers amid the slowdown in aerospace.
Greg Abel, a Berkshire vice chairman, said at the Omaha, Nebraska-based conglomerate’s May 2 annual meeting that Precision’s defense contract business remained “very sound and strong.”
The case is Precision Castparts Corp et al v Schulz Holdings GmbH & Co, U.S. District Court, Southern District of New York, No. 20-03029.
(Reporting by Jonathan Stempel in New York; Editing by Richard Pullin)
