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Post by jannikki on Dec 5, 2006 22:01:18 GMT -4
"Possible cover-up" in SEC Pequot case: lawmaker WASHINGTON (Reuters) - Two senior U.S. lawmakers on Tuesday questioned the handling by market regulators of an insider trading probe involving hedge fund Pequot Capital and John Mack, CEO of Wall Street giant Morgan Stanley . Pennsylvania Republican Sen. Arlen Specter, chairman of the Senate Judiciary Committee, said he was disturbed by the Securities and Exchange Commission's management of the matter. "At best it looks like extraordinarily lax enforcement by the Securities and Exchange Commission ... At worst, it has the overtone of a possible cover-up," Specter said at a hearing by his committee that looked into the Pequot investigation. At the close of the hearing, where officials involved in the probe testified, Specter said, "We are not finished with this. There are people under oath with directly contradictory testimony. It's very, very troubling." The Pequot affair emerged earlier this year when former SEC attorney Gary Aguirre alleged he was fired and the probe, which he had led, was halted after it got too close to Mack. Aguirre said he suspected that Mack tipped Pequot to a 2001 merger deal that allowed the hedge fund to make an illegal $18 million insider-trading profit. At the time, Mack worked at a different investment bank. He earlier had led Pequot, as well. Aguirre claimed he wanted to subpoena Mack, but was stopped by SEC supervisors because of Mack's political clout. When he pressed the issue, Aguirre said, he was fired, despite being praised earlier by superiors and getting a pay raise. Iowa Republican Sen. Charles Grassley said at the hearing that the case "raises serious questions for me about whether 'captains of industry' get the same treatment as regular investors or whether they get treated with kid gloves." SEC officials told the Senate panel that Aguirre was fired because of a series of problems at work and that the Pequot probe was not influenced by political sensitivities. SEC Enforcement Director Linda Thomsen said Aguirre's allegations "are simply not true." Aguirre was dismissed from the SEC on September 1, 2005, after a year on the job, due to his "inability to work effectively with other staff and his unwillingness to operate within the Securities and Exchange Commission process," Thomsen said. SEC Enforcement Division Branch Chief Robert Hanson told the committee that he has no reason to believe political considerations came into play in the Pequot probe. SEC Enforcement Division Assistant Director Mark Kreitman, a former Aguirre supervisor, said at the hearing that Aguirre threw "tantrums" at the office, "storming down the halls in a furious crouch and abruptly left the office without leave on a number of occasions." He said no politics affected the probe. Responding to SEC officials, Aguirre told the committee: "I have not seen a single piece of paper backing anything that they have said and I've been trying to get it." A second individual raised questions about the handling of the investigation at the hearing. Eric Ribelin, branch chief in the SEC's Office of Market Surveillance, told the committee he was "stunned" and "outraged" when Aguirre was dismissed. "Gary Aguirre was a tenacious investigator in an aggressive investigation. In my judgment, he's a professional," said Ribelin, who worked with Aguirre on the Pequot inquiry. He said something "smelled rotten" about the probe. He questioned the commitment to it of other SEC officials. Morgan Stanley said last week that the SEC had formally cleared Mack in the probe of Pequot. The hedge fund said in October it had been cleared. No SEC charges have been filed against anyone in the Pequot matter. Thomsen said Pequot was thoroughly investigated. She added: "We did not find sufficient evidence to support an enforcement action. Accordingly our investigation was closed." Copyright 2006 Reuters news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20061205&ID=6249945
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Post by jannikki on Dec 5, 2006 22:07:32 GMT -4
Mack The Knife: "Another Bad Guy" We expected today's Senate hearing on hedge funds to go rather badly for Gary Aguirre. The former SEC investigator publicly accused the agency of political favoritism for allegedly quashing his investigation into possible insider trading at Pequot Capital. Since then the SEC has re-opened its investigation and cleared both Pequot Capital and Morgan Stanley chief John Mack, who Aguirre had sought to subpoena as a possible source of the insider tips he suspected Pequot traded on. But it's not going badly. At least not for Aguirre. Another investigator is scheduled to appear as a witness and expected to at least partially back-up his claims. And at least one of his supervisors did not seem very credible before the Senate committee, resorting to cliches such as telling the committee that "I do not recall" telling Aguirre that Mack was too well-connected to subpoena. Rather than making Aguirre look like a rogue agent on the warpath, the testimony is only raising new questions about the competence of the SEC. The most devasting moment probably came when Arlen Specter revealed that Aguirre's supervisor had called Mack "another bad guy." DealBook catches the moment nicely: In defending the handling of their investigation of Pequot Capital Management, the Securities and Exchange Commission has argued that former S.E.C investigator Gary Aguirre did not have enough evidence to justify questioning John Mack, now the chief executive of Morgan Stanley, in the case. So it was with great interest that Senator Arlen Specter, the committee’s chairman, pointed out a June 3, 2005, e-mail in which Robert Hanson, the branch chief of the Securities and Exchange Commission’s enforcement division who was Mr. Aguirre’s direct supervisor, wrote in part that “Mack is another bad guy (in my view.)” Confronted with this e-mail by Mr. Specter during Tuesday’s hearing, Mr. Hanson said he could not remember why he that at that time. “In hindsight, it was probably to encourage, probably, the investigation to wherever it led,” he said. “And looking back, in hindsight, those words were probably inappropriate.” S.E.C. Branch Chief Called Mack ‘Another Bad Guy’ [New York Times] www.dealbreaker.com/2006/12/mack_the_knife_another_bad_guy.php
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Post by jannikki on Dec 8, 2006 20:51:26 GMT -4
Pequot probe lawyer had performance issues-US SEC By Kevin Drawbaugh WASHINGTON, Dec 5 (Reuters) - An attorney accusing U.S. securities regulators of halting an insider trading probe due to political issues was fired last year after many problems on the job, current and former Securities and Exchange Commission officials are expected to tell a Senate Committee on Tuesday. SEC Enforcement Director Linda Thomsen will tell lawmakers that allegations made by Gary Aguirre about the handling of a probe into hedge fund Pequot Capital "are simply not true," according to prepared testimony made available to Reuters. Aguirre was dismissed from the SEC on Sept. 1, 2005, due to his "inability to work effectively with other staff and his unwillingness to operate within the Securities and Exchange Commission process," Thomsen's written testimony says. Aguirre, reached by Reuters late on Monday, said he will present testimony of his own on Tuesday to the Senate Judiciary Committee, which is looking into the matter. "All of the SEC's testimony is unsupported by evidence, contrary to every evaluation they wrote and is leaked to the media the night before they're called to testify to distract attention from the real issues that will be before the committee tomorrow," Aguirre said. The SEC said in a court filing in September that Aguirre won praise from supervisors and a merit pay hike during his one-year tenure. But he was then fired by the agency. The Aguirre case has complicated the SEC's relations with Congress since it emerged earlier this year, following Aguirre's dismissal after he worked one year at the agency. TOO CLOSE TO MACK Aguirre alleged he was fired by the SEC because the investigation he led into Pequot Capital got too close to John Mack, now CEO of Wall Street giant Morgan Stanley (MS.N: Quote, Profile , Research). Aguirre said his inquiry led him to suspect that Mack tipped Pequot to a 2001 merger deal that allowed the hedge fund to make an illegal $18 million insider-trading profit. The former investigator claimed he wanted to subpoena Mack, but was stopped because of Mack's political clout. Morgan Stanley has said that no one has provided any evidence that Mack engaged in any wrongdoing. Connecticut-based Pequot has denied any wrongdoing. Paul Berger, former SEC associate enforcement director and one of Aguirre's former supervisors, is set to appear before the committee, with Aguirre, Thomsen and other officials. In his prepared testimony, Berger calls Aguirre's allegations "utterly and completely false." He says no one stopped an SEC investigation in which Aguirre was involved. "In fact, that investigation continued a year after Mr. Aguirre's departure," Berger says. He says no one refused Aguirre's request to take testimony from Mack and no one said the SEC staff was reluctant to take Mack's testimony because he had "political influence." No SEC charges have been filed against anyone in the Pequot matter. Thomsen said in her testimony that the Pequot case was thoroughly investigated. She added: "We did not find sufficient evidence to support an enforcement action." Two U.S. senators have complained to SEC Chairman Christopher Cox about the handling of the matter. Iowa Republican Charles Grassley and Pennsylvania Republican Arlen Specter wrote in August to Cox, saying despite SEC cooperation in their inquiries, "many questions ... remain unanswered." Grassley and Specter called an internal SEC review of the case "troubling." Specter chairs the Judiciary Committee. © Reuters 2006. All Rights Reserved today.reuters.com/news/articleinvesting.aspx?view=CN&symbol=&storyID=2006-12-05T124829Z_01_N05253386_RTRIDST_0_CONGRESS-AGUIRRE.XML&pageNumber=1&WTModLoc=InvArt-C1-ArticlePage1&sz=13
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Post by jannikki on Dec 8, 2006 20:55:00 GMT -4
SEC denies politics interfered in Pequot probe SEC lawyer also tells lawmakers about concerns By Robert Schroeder, MarketWatch Last Update: 5:13 PM ET Dec 5, 2006 WASHINGTON (MarketWatch) -- Top officials of the Securities and Exchange Commission denied politics played any role in their investigation of a big hedge fund and an influential Wall Street executive even as a current SEC employee raised concerns about the probe. Eric Ribelin, branch chief of the SEC's office of market surveillance, told members of the Senate Judiciary Committee on Tuesday that SEC enforcement branch chief Robert Hanson told him the agency "would have to be careful" about taking current Morgan Stanley CEO John Mack's testimony because of his prominence. That statement, given under oath, lent some support to former SEC investigator Gary Aguirre's complaints to Congress that his effort to subpoena Mack in connection with a probe of possible insider trading by Pequot Capital Management was squashed. Aguirre, who was dismissed from the agency in September 2005, accused his former employers of sparing Mack from being subpoenaed because of his "powerful political contacts." Read Aguirre's testimony. But SEC officials including enforcement director Linda Thomsen told Judiciary Committee members that charges leveled by Aguirre are false. Thomsen and others denied that they blocked Aguirre from taking Mack's testimony because of his political clout. "I want you to know that these allegations are simply not true," Thomsen said in prepared testimony. See full text. Aguirre told lawmakers that Hanson, who was his supervisor, told him on June 22 or 23, 2005 that he couldn't issue a subpoena for Mack. Hanson countered Aguirre's charge in a statement before the committee. "No one has ever asked or suggested that I refrain from taking a person's testimony because of his or her political connections," Hanson said. Read testimony. Tuesday's hearing came shortly after the agency closed its investigation into Mack and Pequot. Pequot head Arthur Samberg said last week that Pequot received a letter from the SEC, saying that it had formally concluded its insider-trading probe and that SEC staff had recommended no action against the firm or its employees. The SEC interviewed Mack in August. But Senate Judiciary Committee Chairman Arlen Specter, a Republican from Pennsylvania, remained interested in the details of the investigation. "At best, it looks like extraordinarily lax enforcement by the Securities and Exchange Commission," Specter said Tuesday. "At worst, it has the overtone of a possible coverup." "We're not finished with this, ladies and gentlemen," Specter said at the end of the hearing. Senate committee report Aguirre's claims have piqued the interest of senators, and the Senate Finance Committee is expected to issue a report early next year about the SEC's handling of the Pequot probe. Aguirre told the committee last summer that he suspected Mack may have tipped Pequot to a pending acquisition. Pequot has denied receiving tips that resulted in insider trading, and Morgan Stanley said that there was no evidence of wrongdoing by Mack. The SEC's probe focused on as many as 18 stock trades, including trading that occurred before a July 30, 2001, announcement of a $5.3 billion acquisition of Heller Financial Inc. by General Electric Co. Earlier that month, Mack had been named CEO of Credit Suisse Group, which advised Heller. The SEC has denied giving anyone special treatment during the investigation, a point Thomsen reiterated in her testimony Tuesday. "We have gathered evidence from and about, and in some instances we have sued, captains of industry, presidential cabinet members, members of Congress, and celebrities, as well as thousands of other far less well known people," Thomsen said. Separately, Mark Kreitman, assistant SEC enforcement director, told committee members that Aguirre appeared to be pursuing "a personal agenda bordering on vendetta" against Mack, and that Aguirre was terminated from the SEC after demonstrating an inability to work effectively with his colleagues. The Government Accountability Office, the investigative arm of Congress, is also reviewing the SEC's enforcement practices at the request of Sen. Charles Grassley, an Iowa Republican who currently heads the finance committee. Grassley will be replaced as chairman when Democrats take control of Congress in January. Robert Schroeder is a reporter for MarketWatch in Washington. www.marketwatch.com/News/Story/Story.aspx?guid=%7B07DC60A0-A0B2-44F1-B4B0-38203A1B4795%7D&siteid=google&dist=
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Post by jannikki on Dec 8, 2006 20:56:16 GMT -4
Ruling rejects claim of influence Political pressure alleged in probe of hedge fund By Marcy Gordon, Associated Press Washington | Four enforcement officials at the Securities and Exchange Commission rejected 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 Tuesday to the Senate Judiciary Committee, bolstered the claims by fired attorney Gary Aguirre. Eric Ribelin, branch chief of the SEC's market surveillance office, testified said that one of Aguirre's supervisors told Ribelin that because Mack was prominent, SEC attorneys "would have to be careful" about interviewing him in the investigation. In a September 2005 e-mail that committee Chairman Arlen Specter, R-Pa., read at the hearing, Ribelin wrote to a supervisor: "I have serious misgivings about many of the decisions made in this investigation. ... Something smells rotten." At Tuesday's hearing, scrutiny focused 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," Specter declared. "At worst, it has the overtone of a possible cover-up." After listening to lengthy testimony in which Aguirre and Ribelin on the one hand and the four SEC enforcement officials on the other 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. www.wilmingtonstar.com/apps/pbcs.dll/article?AID=/20061207/NEWS/612070353/-1/State
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Post by jannikki on Dec 8, 2006 20:59:34 GMT -4
Senators Question SEC's `Kid Glove' Treatment of Mack (Update2) By Otis Bilodeau and David Scheer Dec. 5 (Bloomberg) -- U.S. Securities and Exchange Commission officials faced skeptical questions from two senators in a hearing on a former agency investigator's claim that Morgan Stanley Chief Executive Officer John Mack was ``insulated'' from an insider-trading probe. The SEC's ``resistance'' to interrogating Mack in the case ``raises serious questions for me about whether captains of industry get the same treatment as regular investors, or whether they get treatment with kid gloves,'' said Charles Grassley, an Iowa Republican and chairman of the Senate Finance Committee. The hearing dwelt on allegations that Mack's political influence as chairman of the second-largest U.S. securities firm derailed the SEC probe. Gary Aguirre, an ex-SEC investigator fired by the agency last year, repeated those claims today, saying supervisors blocked him from pursuing the case after he surmised that Pequot Capital Management Inc. might have traded on inside information from Mack. Mack, 62, was chairman of Pequot, a hedge fund firm, before he was hired to run Morgan Stanley. Eric Ribelin, an SEC investigator who worked with Aguirre on the case, sided with him at today's hearing, calling him a ``tenacious'' lawyer. Ribelin said he was told by one of Aguirre's supervisors the agency would have to be ``careful in taking Mack's testimony'' because he was ``prominent.'' Suing `Captains' Linda Thomsen, the SEC's top enforcer, said politics played no part in its handling of the case. The SEC has sued ``captains of industry, presidential cabinet members, members of Congress and celebrities,'' she said in her testimony. ``The enforcement division does not pull its punches.'' Instead, SEC officials said Aguirre was fired because he refused to be supervised and worked poorly with colleagues, ultimately forcing supervisors to double-staff the probe. ``Toward the end, Aguirre's behavior became increasingly unprofessional, irresponsible and erratic,'' one of his former supervisors, Mark Kreitman, testified. ``He threw what can only be fairly described as tantrums, storming down the halls in a furious crouch, abruptly leaving the office.'' Aguirre's claims that the SEC ``insulated'' Mack, who he described as a ``Wall Street titan,'' sparked concerns from Grassley and Arlen Specter, a Pennsylvania Republican and chairman of the Senate Judiciary Committee, who presided over today's hearing. The senators questioned whether the SEC's internal investigation into the complaints had been bona fide or had sought to discredit Aguirre. The review by the agency's inspector general found no evidence politics played a role in his firing. Specter said the inspector never talked to Aguirre. ``At best, it looks like extraordinary lack of oversight by the Securities and Exchange Commission,'' Specter said. ``At worst, it looks like some sort of cover-up.'' The senator also aimed many questions at Robert Hanson, an SEC official accused by Ribelin and Aguirre of expressing concern about Mack's prominence and influence. Hanson said he couldn't remember commenting on Mack's political connections to Aguirre and said his comments to Ribelin only meant to underscore the need ``to be sure we had our ducks in a row before taking Mack's testimony.'' The SEC eventually questioned Mack after considering the ``harm'' Aguirre had caused the regulator's reputation by taking the confidential investigation public, Hanson said. SEC's Conclusions Mack's interview took place Aug. 1 after the SEC continued to probe him and Westport, Connecticut-based Pequot following Aguirre's departure, according to an internal memo accompanying Thomsen's testimony. The memo, dated Nov. 30, says investigators found no basis to conclude that Mack picked up inside information about General Electric Co.'s 2001 acquisition of commercial lender Heller Financial before Pequot began betting that Heller shares would rise. The agency sent letters to Mack and Pequot last week, telling them the case had been closed and no action would be taken against them. Both had repeatedly denied wrongdoing. Grassley has asked the Government Accountability Office to open a probe of the SEC's enforcement division and compliance department. He said stronger laws are needed to prohibit government agencies from discouraging whistleblowers working with congress by subpoenaing their communications, and Specter agreed. ``We're not finished with this,'' Specter said as the hearing ended. To contact the reporter on this story: Otis Bilodeau in Washington at obilodeau@bloomberg.net . Last Updated: December 5, 2006 16:00 EST www.bloomberg.com/apps/news?pid=20601087&sid=a_VGImrU6HSc&refer=home
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Post by jannikki on Dec 9, 2006 9:32:17 GMT -4
SEC officials deny accusation of hampering inside-trading probe Posted 12/5/2006 9:01 PM ET By Marcy Gordon, The Associated Press WASHINGTON — Four officials at the Securities and Exchange Commission, including the head of the enforcement division, on Tuesday denied allegations by a former agency attorney that they allowed political considerations to hamper an inside-trading investigation of Wall Street executive John Mack and a major hedge fund. But another SEC official, appearing at the same Senate Judiciary Committee hearing, 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 the hearing, the spotlight of scrutiny fell on how the normally low-profile agency handled its investigation into Pequot Capital Management. "At best, it looks like extraordinarily lax enforcement by the Securities and Exchange Commission," said 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 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 authority 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, 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 and Heller Financial. Aguirre has pointed to Mack as the person likely to have 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." www.usatoday.com/money/companies/regulation/2006-12-05-sec-hearing_x.htm
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