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Tue Jan 29, 2013, 06:36 PM

Um... About Our New SEC Nominee, Mary Jo White... Meet SEC Whistleblower Gary Aguirre

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<snip>

SEC investigator, becomes whistleblower

In July 2004, Aguirre entered public service as a senior counsel at the SEC Division of Enforcement in Washington, D.C. A routine check of Wall Street trades flagged unusually heavy stock purchases by Pequot Capital Management, a hedge fund, in Heller Financial in July 2001, which was bought by GE Capital shortly thereafter, earning Pequot $18 million inside of a month. Aguirre was made the lead investigator on the case.

“ First of all, the profit on it was $18 million in one month and it was handled solely by the CEO of the hedge fund <Arthur Samberg> without collaboration by anybody else. In fact, their internal regulations about how you were supposed to make these kinds of decisions—talk to other people, visit the company—none of these things was done. There were no e-mails, there were no reports, there was no research, no contact with any companies, no contact with third parties. There was just nothing. One day this guy <Samberg> just says, ‘Heller Financial!’

As it says in the Senate report, Samberg’s orders were sometimes for twice as much stock as sold on that day. So if you’re selling 200,000 shares that day, he wanted to buy 400,000. Well, how come you’re buying all of this if you’ve never done any research, you haven’t talked to these guys, you don’t follow the stock? There was no rational explanation why this guy bought more stock than anybody else in the country during these 30 days. So then we began to backtrack—who did he talk to immediately before he bought it that could’ve known anything about this stock? Well, of course, there was only one person, and that was John Mack.

—Gary J. Aguirre, San Diego Magazine


Aguirre pushed to subpoena John Mack, a top Wall Street executive who was then under consideration by Morgan Stanley to become its CEO and had been a major contributor to the 2004 presidential campaign of George W. Bush. Initially, Aguirre had the full support of other SEC staff and of his supervisors. This changed on June 23, 2005, when Aguirre received a phone call from Eric Dinallo, head of regulatory compliance at Morgan Stanley, who wanted to know if the SEC was "going to proceed against Mack" because of concerns revolving around Morgan Stanley's decision to hire Mack as CEO. The same day, Aguirre's supervisor, Robert Hanson, told him it would be an uphill battle to pursue Mack because of Mack's "powerful political connections".

Investigation derailed

Just three days after the call to Aguirre, Mary Jo White placed a call to Linda Chatman Thomsen. Thomsen was then SEC Director of Enforcement and Aguirre's boss four levels above him. White is a partner at Debevoise & Plimpton, the law firm hired by Morgan Stanley to vet Mack and was in charge of the process She had previously been the U.S. Attorney for the Southern District of New York which has jurisdiction over Wall Street. Though Thomsen told the Senate she told White she couldn't say anything about the Mack investigation, the Senate report said White's talking points indicated Thomsen had said there was "smoke" but "surely not fire".

Over the next two days, Aguirre sent his supervisors his analysis of the evidence against Pequot and proposed interviewing Mack. On June 28, he had a "heated discussion" with Mark Kreitman, one of his supervisors and his former professor at Georgetown, over the SEC's refusal to interview Mack. In the meantime, he was given his year-end performance evaluation, which noted his dedication. Hanson wrote, " has consistently gone the extra mile, and then some," and a two-step salary increase was approved.

A month later, on July 27, 2005, Aguirre sent an e-mail to his supervisor Paul R. Berger, explaining the importance of the Mack subpoena and expressing concern that “treating Mack differently is consistent with the Commission’s mission, which is "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." In this e-mail, Aguirre also reported to Berger that Hanson had said Mack had "political connections".

Retaliation

Though given a pay raise and praised for his work on the Pequot case, after Aguirre raised concerns about the special treatment being given Mack, Berger told Hanson to do a "supplemental evaluation" of Aguirre and one other staff attorney "looking to raise trouble". The Senate report notes that such re-evaluations were not an authorized part of the SEC evaluation process, nor were SEC officials able to recall other instances where "supplemental evaluations" were drafted for other employees. Aguirre continued to have conversations with Hanson about Mack in the early days of August. Hanson continued to refer to Mack's political connections and on August 4, 2005 wrote, "Mack’s counsel will have ‘juice’ as I described last night—meaning that they may reach out to Paul and Linda (and possibly others)." Apparently setting a precedent, Aguirre's supervisors re-evaluated his job performance, reversing the positive appraisal given just one month prior. While on vacation, Aguirre was abruptly fired without warning on September 1, 2005. His termination was later found to have been unlawful by the subsequent Senate investigations and report.

Berger stopped the investigation of Mack and closed the case against Pequot without filing a single charge. A few months prior, on January 31, 2005, Berger had gotten an e-mail from Jan Lower, another attorney, describing in detail the $2 million potential earnings an SEC official could earn at Debevoise. On September 8, 2005, just days after Aguirre was fired, an SEC official at the same staff level as Berger wrote an e-mail to him titled "Debevoise", saying he had mentioned Berger's "interest" to White and within weeks, it was rumored that Berger would be leaving the SEC to join Debevoise & Plimpton as a partner. Berger submitted his resignation to the SEC on May 15, 2006 and on June 1, 2006 became a partner at Debevoise & Plimpton, where he continues to work. White denies asking the SEC to close any investigation.

Vindication by the Senate

Aguirre wrote an 18-page letter to members of the U.S. Senate who were chairmen of various related committees and subcommittees, detailing his allegations about Pequot. Senators Charles E. Grassley and Richard C. Shelby, both Republicans, asked SEC officials for a confidential briefing on the matter. Aguirre accused the SEC of failing to pursue Mack because of his political connections as a major fundraiser for George W. Bush. By 2006, both the Senate Finance Committee and the Senate Judiciary Committee were investigating the matter, culminating in what Forbes magazine called a "scathing" report. In testimony, Aguirre told the committee there needed to be better regulation of hedge funds to protect the public. He said, “There is growing evidence that today’s unregulated hedge funds have advanced and refined the practice of manipulating and cheating other market participants. The potential harm hedge funds can inflict on other market participants has no real limits." He warned that fixing the SEC so it would protect investors and capital markets would not be easy because powerful Wall Street investment banks liked things as they are He said the SEC and the Justice Department had failed to adequately prosecute abuses by hedge funds, and he compared the situation to that which preceded the stock market crash of 1929.

In the Senate's oversight role, it conducted an extensive investigation of whether or not Mack received unlawful preferential treatment from the SEC and whether or not Aguirre was unlawfully fired as a result of objecting to this treatment. The Senate reviewed 10,000 pages of documents and held more than 30 witness interviews. Additionally, there were three hearings before the Senate Judiciary Committee in June, September and December 2006. The joint report was officially released August 3, 2007. The Senate found Aguirre to have been well regarded until he questioned the SEC's misconduct toward Mack, that Mack was treated preferentially and that Aguirre was illegally fired in retaliation.

Court vindication and settlement...

<snip>

More: http://en.wikipedia.org/wiki/Gary_J._Aguirre






16 replies, 1094 views

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Arrow 16 replies Author Time Post
Reply Um... About Our New SEC Nominee, Mary Jo White... Meet SEC Whistleblower Gary Aguirre (Original post)
WillyT Jan 2013 OP
dixiegrrrrl Jan 2013 #1
WillyT Jan 2013 #2
WillyT Jan 2013 #3
Egalitarian Thug Jan 2013 #4
WillyT Jan 2013 #5
liberal_at_heart Jan 2013 #6
hay rick Jan 2013 #7
WillyT Jan 2013 #8
Bake Jan 2013 #10
forestpath Jan 2013 #9
Oilwellian Jan 2013 #11
WillyT Jan 2013 #12
hay rick Jan 2013 #13
WillyT Jan 2013 #14
pampango Jan 2013 #15
woo me with science Jan 2013 #16

Response to WillyT (Original post)

Tue Jan 29, 2013, 06:58 PM

1. And the beat goes on....

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Response to dixiegrrrrl (Reply #1)

Tue Jan 29, 2013, 07:01 PM

2. Don't It Though...




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Response to WillyT (Original post)

Tue Jan 29, 2013, 07:57 PM

3. Crickets ???




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Response to WillyT (Original post)

Tue Jan 29, 2013, 08:06 PM

4. The Great and Powerful O wants her, so we won't talk about it. n/t

 

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Response to Egalitarian Thug (Reply #4)

Tue Jan 29, 2013, 08:09 PM

5. I Have No Idea Of What You Are Talkng About...






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Response to WillyT (Original post)

Tue Jan 29, 2013, 08:12 PM

6. busniness as usual with Obama's corportist appointments

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Response to WillyT (Original post)

Tue Jan 29, 2013, 08:30 PM

7. More on Mary Jo White.

My recent post: http://www.democraticunderground.com/10022261421

From her biography on her employer's website.

"Ms. White’s practice concentrates on internal investigations and defense of companies and individuals accused by the government of involvement in white collar corporate crime or Securities and Exchange Commission (SEC) and civil securities law violations, and on other major business litigation disputes and crises. For her criminal work, she leads a Debevoise team that includes eleven former Assistant U.S. Attorneys with extensive experience in major commercial investigations and prosecutions."


Other MJW threads:
http://www.democraticunderground.com/1251280068
http://www.democraticunderground.com/101653990

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Response to hay rick (Reply #7)

Tue Jan 29, 2013, 09:11 PM

8. Thank You For That !!!




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Response to hay rick (Reply #7)

Tue Jan 29, 2013, 09:29 PM

10. Looks like White sold her criminal experience as a federal prosecutor for a tidy sum.

I have major reservations about her appointment. And I'm tired of the President's circle-jerk with Wall Streeters and their enablers like White.

Bake

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Response to WillyT (Original post)

Tue Jan 29, 2013, 09:25 PM

9. Obama couldn't make it any clearer whose side he's really on.

 

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Response to WillyT (Original post)

Tue Jan 29, 2013, 09:32 PM

11. WillyT, it's so in our faces now

I fear this is an indication of some very bad times ahead. Wall Street has been quite vocal about what they want to see happen. Durbin said they own the Senate and it's quite obvious they own the WH as well.

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Response to Oilwellian (Reply #11)

Tue Jan 29, 2013, 09:35 PM

12. In Or Faces... AND... In Our Court...

Cannot hide behind George W's skirts anymore...




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Response to WillyT (Original post)

Tue Jan 29, 2013, 09:36 PM

13. Another article of interest.

http://thinkprogress.org/economy/2013/01/24/1489131/what-to-know-about-mary-jo-white-obamas-appointment-to-the-sec/

From the article:

She has a lineup of fascinating non-white collar cases. Among the things White prosecuted during her time working as an Attorney for the state of New York are: Two bombing cases (including the 1993 World Trade Center bombing), drug trafficking, and the prosecution of mob boss John Gotti. On the other side, White also defended directors at News Corp. during the phone hacking scandal there.


She seems to be comfortable playing it either way with slimeballs. She also defended Ken Lewis of Bank of America against charges of security fraud...

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Response to hay rick (Reply #13)

Tue Jan 29, 2013, 09:41 PM

14. Well...To Be Fair... Lawyers Will Ho For Whoever Has The Money...

This will be interesting to watch, no ???

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Response to WillyT (Original post)

Tue Jan 29, 2013, 09:51 PM

15. She certainly knows all the defense tricks that can be used to protect Wall Street CEO's.

The only way that is useful as head of the SEC is if she uses that knowledge to prosecute these same people.

I get the sense that Wall Street hired her because she was an effective prosecutor for 10 years. They were either afraid of her or, at least, wanted her on their 'team' rather than the 'opposition'.

I hope that Obama has hired her for precisely the opposite reason. She has been an effective defender of Wall Street for 10 years. If she can 'flip' her focus back to prosecution (as she did to defense 10 years ago), she could be very effective given her knowledge of how that works.

It’s a variant of the old argument for picking a police chief who knows what the crooks are up to, which is what F.D.R. did when he appointed Joseph Kennedy, a notorious Wall Street speculator, to be the first chairman of the S.E.C. In introducing White as his nominee, Obama intimated that he saw in her a similarly formidable character. “You don’t want to mess with Mary Jo,” he said.

http://www.newyorker.com/online/blogs/johncassidy/2013/01/send-mary-jo-white-to-justice-not-the-sec.html


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Response to WillyT (Original post)

Tue Jan 29, 2013, 10:26 PM

16. K&R

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