Gary Aguirre

The Two Gary Aguirre Tales

garyaguirrefeb07.jpgHey. Wait a minute! Aren’t we the same folks who spilled all those pints of digital ink on Friday bemoaning the corporate crime reporting of business journalists? How dare we start promoting that old Aguirre story again?
Well, you see, there are actually two Aguirre stories. One over-reported, smear-filled and not very helpful to the public understanding of some real problems with American business and finance. And the other? You guessed, under-reported, helpful and not anywhere near as full of name-through-the-mud hotness.
Aguirre’s charges garnered a lot of attention from the press. Far more than you might expect for a bureaucrat blowing the whistle on his superiors, charging them with cravenness before the powerful and politically connected. You can get that story at any happy hour on Capitol Hill. What attracted attention to this story was that the executive Aguirre had been investigating, John Mack, was running Morgan Stanley. According to Aguirre’s theory, Mack could have leaked information to Arthur Samberg, the head of the hedge fund Pequot Capital Management Pequot about a coming takeover bid of Heller Financial by General Electric. Pequot is said to have made around $18 million from the deal.
So you had a big Wall Street bank. It’s top executive. A high-flying hedge fund. A famous money manager. One of America’s best-known companies. All allegedly tied together in some sort of neat knot of insider trading. And then there was the fact that Mack was said to be close to President George Bush, adding the scent of political favoritism to the whole mess. It was practically the perfect corporate crime storm. And it proved irresistible to the press.
One problem with the story of this particular crime of the century was that the facts had a way of not panning out. The SEC launched renewed investigations into the Heller transaction and cleared everyone involved. Mack, Samberg, Morgan Stanley and Pequot had all had their names dragged through the mud for months without anything substantiating the charges other than a former investigator’s theory and a couple of phone records showing that Mack had called Samberg around the time of the Heller deal.
Another problem was that Aguirre kept saying that his real beef was not with the targets of his investigation but with the SEC. Aguirre was alleging that the most powerful firms on Wall Street got special treatment from the SEC, in part because the regulators had a too cozy relationship with the folks they were supposed to be regulating. This story never got as much attention, perhaps because it was a lot less sexy.
Unfortunately it was this part of Aguirre tale that made the most sense. There is a revolving door between the SEC’s upper echelons and the top Wall Street firms, who often hire former investigators, regulators and commissioners once they leave the agency. What’s more, the SEC was more or less created by Wall Street to help boost investor confidence by creating the impression that someone was policing the financial sector and protecting investor interests. And from the start the SEC had helped stifle competition on Wall Street by increasing regulatory overhead and banning many of very the practices that had led some Wall Street giants to accumulate their power and capital. With the SEC around, for instance, it became much harder to build a new investment banking giant. (And this is one reason so much of the brains on Wall Street has fled to private equity and hedge funds.)
And this might be the heart of the reason that the real heart of Aguirre’s story never got the attention it deserved, while the less-substantiated and more thrilling insider trading storyline hogged the headlines. At it’s heart, Aguirre’s story is not even news. It’s something we’ve known for a long, long time. And that old story about how bureaucracies operate doesn’t really translate into the sort of civil rights storyline reporters think will win them Pulitzers. So we don’t hear much about that.

Gary Aguirre: The SEC Is An Insider’s Club

garyaguirrefeb07.jpgRemember Gary Aguirre? He was the former Securities and Exchange Commission investigator whose explosive charges led to a series of hearings on Capital Hill and a lot of alarm-bell ringing publicity, particularly from Gretchen Morgenson of the New York Times. Aguirre’s main charge was that he was fired from the SEC after an investigation into possible insider trading led him toward a top Wall Street executive.
Today the Guardian reminds us that not only is Aguirre still around. So are the problems he became famous exposing:

“What you have at the SEC is people rotating from jobs where you make $180,000 a year into jobs where you make over a million,” Aguirre tells the Guardian in an interview, on what he sees as a mutually back-scratching relationship between the regulator and Wall Street. “It’s very friendly – it’s a club. I’m here, I’m inside, now I’m outside, now I’m inside again.
“When the SEC starts playing favourites and they decide not to go after Wall Street elite and focus on small fry, then they’re not focusing on the players that really impact the capital markets. It’s not the penny stock dealers that could trigger a credit crisis in this country.”

Enforcer who stalked Mack the Knife tells of Wall Street scandal
[The Guardian]

  • 04 Jan 2007 at 10:04 AM
  • Banks

Gary Aguirre: My Target Is The SEC

We’ve been pointing out for a long time that the really (potentially) explosive issue raised by former SEC investigator Gary Aguirre was not the now-officially dismissed suspicions of insider trading by Pequot Capital or illegal tipping by John Mack, but the still largely univestigated charges of favoritism at the SEC. Recall that Aguirre claimed he was fired from the SEC for trying to subpoena John Mack, who was then about to become the top man at Morgan Stanley. Now the mainstream media, for reasons of its own, has enjoyed playing up Mack’s connections to the Bush administration but a more relevant fact is probably his status as the head of a major Wall Street bank. This raises the fear that the SEC has been captured by the very industry its supposed to regulate. (By the way, even this might be too optimistic, since the words “been captured” imply that the regulatory agency was not created, owned and operated by the largest investment banks right from the start.)
In today’s Wall Street Journal, the Aguirre makes it clear that this was the whole point of his testimony to the Senate.

My allegations to the Senate have focused only on the SEC. I have alleged: (1) senior SEC officials gave Mr. Mack favored treatment; (2) those officials fired me for questioning that favored treatment; and (3) the SEC’s inspector general whitewashed the whole affair.

My Charges Against SEC Are Justified [Wall Street Journal]

  • 23 Oct 2006 at 9:33 AM
  • Banks

The Pequot Capital-Heller Financial-SEC Investigation

Although the SEC has subsequently reinvestigated and cleared Pequot Capital and Morgan Stanley chief John Mack in connection with Pequot’s acquisition of a large state in Heller Financial in the weeks leading up its acquisition by GE, questions still linger over allegations that the initial investigation was quashed when the lead investigator sought to subpoena Mack. Now two Senate investigations are underway to determine whether the SEC failed to thoroughly conduct the initial investigation and whether politics played a role in that failure.
On Sunday the New York Times ran a story based on files the canned SEC investigator, Gary Aguirre, had turned over to Senate investigators. The evidence seems pretty damning.

The file shows that after Mr. Aguirre was blocked from questioning Mr. Mack about the Heller deal, Mr. Hanson, the S.E.C. branch chief, acknowledged in e-mail messages that he had discussed Mr. Mack’s “political clout” and the “juice” of his lawyers with officials at the commission.
In an exchange of e-mails in the summer of 2005, Mr. Hanson said that he had merely been trying to “alert folks above me,” and that politics did not influence S.E.C. decisions. Mr. Aguirre replied: “Bob, this is spin. You told me it would be tough to take Mack’s testimony because he has political clout.”

Ironically, these allegations of political corruption at the SEC are being substantiated at the same time lawmakers are considering giving the SEC more clout over hedge funds. This summer a federal court struck down regulations requiring hedge fund managers to register with the SEC and permit investigators to examine their books.
But if the SEC has trouble engaging in its core functions—investigating things like insider trading—does it really make sense to give the agency an even broader scope of authority?

S.E.C. Inquiry on Hedge Fund Draws Scrutiny

John Mack Off The Hook Too

johnmack3.jpgMorgan Stanley is saying that chief executive John Mack has also been cleared by the SEC of the insider trading allegations raised by a former SEC investigation, CNBC’s Charlie Gasparino reported a few moments ago.
Former SEC investigator Gary Aguirre has said that he was investigating insider trading at Pequot Capital when he was abruptly fired after he sought to depose a top Wall Streeter. The SEC launched an inquiry after Aguirre went public with his charges, testifying before a Senate committee looking into hedge funds.
We should note that clearing Pequot and Mack of insider trading doesn’t make the allegations of political interference with Aguirre’s initial allegations go away. Those allegations were made under oath and penalty of perjury, and so far we haven’t seen any evidence that they’ve been seriously investigated.
Just because John Mack wasn’t engaged in insider trading doesn’t mean someone in the Bush administration didn’t try to protect him from an investigation.
The Score: Pequot and Mack: in the clear. The Sec: still an open question.

Who Will Watch the Watchers?

chriscox3.jpgWell, we guess it’s nice that the SEC is considering today letting Senate investigators interview SEC staffers about the allegations that it fired an investigator looking into insider trading allegations at Pequot Capital when his probe started towards Wall Street’s highest echelons. All along we’ve thought that everyone involved wasn’t treating these allegations seriously enough—the Senate committee charged with overseeing the SEC seemed to take a pass, the SEC barely even shrugged it off and most media outlets haven’t paid enough attention to the story. Especially after the Senate judiciary committee finally brought in the fired SEC investigator, Gary Aguirre, and the allegations were made under oath and penalty of perjury, the charges deserved better than the treatment they initially received.
A few weeks ago, Senators finally started paying real attention to the charges but the SEC stalled, saying it needed the full commission to vote on whether the Senate could look into the charges. If the SEC does anything but vote to fully comply with a Senate investigation, it will be time for the President to become involved. Perhaps the Justice Department needs to appoint a special prosecutor. You wouldn’t think that these were the kind of charges the SEC would want to investigate internally—not if it wants to retain any credibility. But then you don’t work for the SEC.
SEC May Vote On Sharing Hedge Fund Probe Info With Sens [Dow Jones Newswire]