Doris Buffett, sister of Omaha investor Warren Buffett, apparently was one of two customers of a Falls Church brokerage company whose heavy stock market losses forced the firm to close its doors last week, according to sources.
The two customers, who lost $6 million in the market's collapse, defaulted on $2.6 million in obligations owed to the firm, First Potomac Securities Corp., said Carole L. Haynes, the company's president. She declined to identify the customers.
One customer, who apparently was Doris Buffett, owed $1.4 million because of losses in stock and option transactions. Attempts to contact Buffett were unsuccessful. William Leber, an attorney from Hilton Head, S.C., said he represented one of the customers but wouldn't identify which one. "My client doesn't have any comment. I can't confirm or deny the report," he said.
Warren Buffett, chairman of Berkshire Hathaway Co. Inc., is a highly successful investor whose net worth recently was estimated at $2.1 billion by Forbes magazine.
Sources said that Doris Buffett's losses came on investments in stocks or options purchased through a margin account, which allows investors to pay for only part of the investment. The rest is borrowed from the brokerage firm.
Investors who buy stocks on margin put up 50 percent of the cost of the purchase, while customers trading in options need only put up 15 percent of the investment's cost.
If the price of the stock or option falls, the customer may be required to deposit additional cash or collateral in the margin account immediately.
The debts owed by the two investors, plus defaults by several other customers, brought the total deficit at First Potomac to nearly $3 million, Haynes said, far exceeding the firm's capital, which normally ranges between $150,000 and $200,000.
First Potomac has arranged for another brokerage to handle customer accounts.