John Mack

The Aguirre-Mack-Samberg-Pequot-Heller-Credit Suisse-Morgan Stanley-SEC-GAO-Grassley Scandal Goes Meta And Picks Up Two New Players

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The New York Sun thinks that the allegations made against Pequot Capital and Morgan Stanley chief John Mack have been getting a little too much ink from the New York Times. And they think they know why.

Mystified New Yorkers were left wondering what could possibly explain the Times’s fascination with this story. Some might say it’s Mr. Mack’s connection to Mr. Bush, but it could just as easily be Mr. Mack’s connection to Morgan Stanley. That is the bank that, earlier this year, withheld its proxy votes for members of the board of the New York Times Co. to protest the Sulzberger family’s preferential voting status. A Morgan Stanley analyst complained at the time that the Times was underperforming as a business in large part because of the ossified management perpetuated by the ruling family’s use of super-voting shares to control the Times despite a relatively puny stake in the Times company.

It’s a scandal about the scandal! And just insanely paranoid enough to possibly be true!
‘A Full Airing’ [New York Sun]
[Disclaimer: John Carney has written for the New York Sun and the Times, and he's friendly with a couple of the girls at both papers. Morgan Stanley was a client on several deals he worked on. He's never met John Mack or anyone named Sulzberger. George Bush won't return his phone calls.]

    • 23 Oct 2006 at 9:33 AM
    • Banks

    The Pequot Capital-Heller Financial-SEC Investigation

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    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

      The Perfect Storm, DealBreaker Style

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      We’ve been spending some time trying to clear away the murk and shine some light into the shadows of Jeffrey Epstein’s financial dealings in an effort to provide some, uhm, actual financial reporting related to the sex candal encircling the mysterious money manager. There’s not much that is publicly available but we’re still digging.
      What we have discovered, however, is a brief document amending a credit agreement for RELIANT PHARMACEUTICALS, INC. The amendment replaces the administrative agent for the credit. But what caught our eye was the confluence of three DealBreaker subjects all in the same documents.
      The signature pages include lines for Morgan Stanley CEO John Mack, who is scheduled to appear before the SEC in connection with allegations of insider trading at Pequot Capital, as well at Jeffrey Epstein, who signs as trustee of the Wexner Children’s Trust II, part of the financial empire of The Limited founding family. And the agent who is being replaced? Goldman Sachs, where alleged insider trading crooks Eugene Plotkin and David Pajcin worked (not to mention the alma mater of that other DealBreaker obsession, Hank Paulson).
      Now this is no doubt just a coincidence, and not really a conspiracy to make our heads explode. We should probably just take a deep breath and then post a Venn Diagram illustrating the connections but our diagramist is in meetings off-site.
      One additional thought: this is probably the last time you’ll see Epstein’s name coupled with the words “trust” and “children” any time in the near future.

      Reliant Consent, waiver and amendment       [SEC]

        John Mack Hires Someone!! Finally!

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        Kindler.jpgSince it’s already Morgan Stanley Day at Dealbreaker….
        DealBook reports that JPMorgan’s Rob Kindler is moving to Morgan Stanley to be Vice Chairman of Investment Banking where he’ll focus on client relationships, etc., etc.
        The JPMorgan motto (er, “strategic principle”) is, of course, “One Firm. One Team. Be a Leader.”
        Kindler’s version, we’re told, inscribed on a hat he kept in the office: “One Firm. One Team. Bribe a Leader.” He will certainly be missed.
        Robert A. Kindler Joins Morgan Stanley as Head of Investment Banking [NYTimes]

          Activists vs. Mack

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          johnmack.jpgAt yesterday’s Morgan Stanley shareholder meeting, activist Harry Korba took the opportunity to grill John Mack (who is apparently “sexy” according to at least one of you) about the details of the business:

          There were 270 lawyers employed by the company in 2001, Korba said, how many are there now?
          “About 328 full time,” said Mack. “Not including compliance.”
          How much did it cost per copy to print this proxy, Korba asked.
          “Eighty-five cents,” Mack said, not missing a beat.

          We generally like shareholder activists because they make the conference calls more interesting. (While we were working for one, he once showed up for a 9AM investor conference completely stoned, and asked questions accordingly.) So we’re of the opinion that people like Harry Korba should be encouraged.
          We were already looking forward to Overstock’s April 25th meeting, but even more so since the activists will be out in full force. Questions for OSTK, anyone?
          Score One for the Kooks [MarketWatch]