Post by ginger on Dec 5, 2006 21:31:28 GMT -4
Dec. 5, 2006, 3:43PM
4 SEC Officials Deny Interference Claims
By MARCY GORDON AP Business Writer
© 2006 The Associated Press
WASHINGTON — Four enforcement officials at the Securities and Exchange Commission, including the division chief, on Tuesday denied allegations by a former agency attorney of political interference in an insider-trading investigation of Wall Street executive John Mack and a major hedge fund.
But another SEC official, also in sworn testimony to the Senate Judiciary Committee, bolstered the claims by fired attorney Gary Aguirre. "I have serious misgivings about many of the decisions made in this investigation. ... Something smells rotten," Eric Ribelin, branch chief of the SEC's market surveillance office, wrote in an e-mail to a supervisor in September 2005.
At a hearing, the spotlight of scrutiny fell on the normally low-profile agency and its handling of the investigation into hedge fund Pequot Capital Management Inc. "At best, it looks like extraordinarily lax enforcement by the Securities and Exchange Commission," declared committee Chairman Arlen Specter, R-Pa. "At worst, it has the overtone of a possible coverup."
After listening to lengthy testimony in which Aguirre and Ribelin on the one hand and the four SEC enforcement officials on the other sharply contradicted each other, Specter said, "It's very, very troubling what the SEC has done here."
The four officials _ Aguirre's supervisors at the agency and Enforcement Director Linda Thomsen _ portrayed him as a hard-charging and aggressive attorney who also was volatile and given to fits of temper, and had trouble accepting the authority of supervisors and working in a structured organization.
They rebutted Aguirre's assertion that he was fired in September 2005 after he tried to subpoena Mack, now the chairman of investment house Morgan Stanley Inc., in the Pequot investigation.
Aguirre led the investigation, begun last year to determine whether Pequot had received a tip in 2001 from an individual about an upcoming $5.3 billion merger between General Electric Capital Corp. and Heller Financial Inc.
Aguirre has pointed to Mack as the likely person who had tipped Pequot to the merger, potentially enabling the hedge fund to buy and sell shares ahead of the announcement and make millions. Aguirre says his supervisors at the SEC told him that it would be difficult to obtain the subpoena because Mack had powerful political connections.
"I did not say that to Mr. Aguirre as he states," testified Robert Hanson, branch chief in the enforcement division. "I have no recollection of making that statement." Hanson said he was not even aware of Mack's political connections and status as a major fundraiser for President Bush's campaigns.
He called Aguirre's assertions of interference "utterly false."
Said Thomsen: "We follow the facts" wherever they lead and without regard to the prominence of possible targets.
The enforcement division "does not pull its punches," she testified.
Aguirre "had ... personality conflicts with other staff" and "his continued resistance to supervision created a substantial risk of future errors," Thomsen said.
Ribelin, by contrast, testified that he was surprised that Paul Berger, then the associate director of the enforcement division, "did not seem as though he was aggressive" early last year in supporting Aguirre's attempts to get e-mails requested from Mack and others in the investigation.
Ribelin said he was "stunned" and "outraged" to learn that Aguirre was terminated while on vacation.
Specter and Sen. Charles Grassley, R-Iowa, also were sharply critical of the investigation of the matter by Walter Stachnik, the inspector general of the SEC, whose office functions as an independent watchdog.
Stachnik's office had closed its inquiry, without interviewing Aguirre, with a finding that the evidence it developed did not support his allegations. After Aguirre went public with the allegations last June, Stachnik decided to reopen the investigation and to interview him.
"You don't seem to be respecting Mr. Aguirre very well in this whole process," Grassley told Stachnik. "You may be playing footsie with a branch of government that wants to curb congressional investigations."
The SEC notified Mack and Pequot last week that it had completed its investigation and is taking no action against them.
__
On the Net:
Securities and Exchange Commission: www.sec.gov
Pequot Capital Management Inc.: www.pequotcap.com
www.chron.com/disp/story.mpl/ap/fn/4381164.html
4 SEC Officials Deny Interference Claims
By MARCY GORDON AP Business Writer
© 2006 The Associated Press
WASHINGTON — Four enforcement officials at the Securities and Exchange Commission, including the division chief, on Tuesday denied allegations by a former agency attorney of political interference in an insider-trading investigation of Wall Street executive John Mack and a major hedge fund.
But another SEC official, also in sworn testimony to the Senate Judiciary Committee, bolstered the claims by fired attorney Gary Aguirre. "I have serious misgivings about many of the decisions made in this investigation. ... Something smells rotten," Eric Ribelin, branch chief of the SEC's market surveillance office, wrote in an e-mail to a supervisor in September 2005.
At a hearing, the spotlight of scrutiny fell on the normally low-profile agency and its handling of the investigation into hedge fund Pequot Capital Management Inc. "At best, it looks like extraordinarily lax enforcement by the Securities and Exchange Commission," declared committee Chairman Arlen Specter, R-Pa. "At worst, it has the overtone of a possible coverup."
After listening to lengthy testimony in which Aguirre and Ribelin on the one hand and the four SEC enforcement officials on the other sharply contradicted each other, Specter said, "It's very, very troubling what the SEC has done here."
The four officials _ Aguirre's supervisors at the agency and Enforcement Director Linda Thomsen _ portrayed him as a hard-charging and aggressive attorney who also was volatile and given to fits of temper, and had trouble accepting the authority of supervisors and working in a structured organization.
They rebutted Aguirre's assertion that he was fired in September 2005 after he tried to subpoena Mack, now the chairman of investment house Morgan Stanley Inc., in the Pequot investigation.
Aguirre led the investigation, begun last year to determine whether Pequot had received a tip in 2001 from an individual about an upcoming $5.3 billion merger between General Electric Capital Corp. and Heller Financial Inc.
Aguirre has pointed to Mack as the likely person who had tipped Pequot to the merger, potentially enabling the hedge fund to buy and sell shares ahead of the announcement and make millions. Aguirre says his supervisors at the SEC told him that it would be difficult to obtain the subpoena because Mack had powerful political connections.
"I did not say that to Mr. Aguirre as he states," testified Robert Hanson, branch chief in the enforcement division. "I have no recollection of making that statement." Hanson said he was not even aware of Mack's political connections and status as a major fundraiser for President Bush's campaigns.
He called Aguirre's assertions of interference "utterly false."
Said Thomsen: "We follow the facts" wherever they lead and without regard to the prominence of possible targets.
The enforcement division "does not pull its punches," she testified.
Aguirre "had ... personality conflicts with other staff" and "his continued resistance to supervision created a substantial risk of future errors," Thomsen said.
Ribelin, by contrast, testified that he was surprised that Paul Berger, then the associate director of the enforcement division, "did not seem as though he was aggressive" early last year in supporting Aguirre's attempts to get e-mails requested from Mack and others in the investigation.
Ribelin said he was "stunned" and "outraged" to learn that Aguirre was terminated while on vacation.
Specter and Sen. Charles Grassley, R-Iowa, also were sharply critical of the investigation of the matter by Walter Stachnik, the inspector general of the SEC, whose office functions as an independent watchdog.
Stachnik's office had closed its inquiry, without interviewing Aguirre, with a finding that the evidence it developed did not support his allegations. After Aguirre went public with the allegations last June, Stachnik decided to reopen the investigation and to interview him.
"You don't seem to be respecting Mr. Aguirre very well in this whole process," Grassley told Stachnik. "You may be playing footsie with a branch of government that wants to curb congressional investigations."
The SEC notified Mack and Pequot last week that it had completed its investigation and is taking no action against them.
__
On the Net:
Securities and Exchange Commission: www.sec.gov
Pequot Capital Management Inc.: www.pequotcap.com
www.chron.com/disp/story.mpl/ap/fn/4381164.html