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The Two Gary Aguirre Tales

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Hey. 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.