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Did Morgan Stanley’s John Mack Just Get ‘Shot?’

Posted by Larry Doyle on September 10, 2009 7:42 PM |

Why would John Mack step down from his role as CEO at Morgan Stanley? Mack is widely regarded as one of the most competitive, if not cutthroat, individuals on Wall Street. I find it very hard to believe that he is stepping down because he just turned 65. Morgan Stanley is not the U.S Post Office.

Morgan Stanley has been ridiculed for not taking greater risk within its trading division over the last 6 months. In the process, Morgan Stanley has lagged its main rival, Goldman Sachs. What did Mack do to address this problem? He recently hired Jack Demaio, a highly regarded markets pro with whom Mack worked during his short tenure at Credit Suisse. So what happened? Why is Mack stepping aside? I think in true Wall Street fashion, he may have been pushed out, or — in Wall Street parlance — he just ‘got shot.’ Why? What have we learned and what do we know?

After Mack left Morgan Stanley in 2001, he was headed to work at Pequot Capital, a large hedge fund run by the legendary Art Samberg. In the midst of his transition to Pequot, Mack was thought to have been involved in providing inside information about Microsoft to Samberg.

Bloomberg addressed this story on May 28th in writing, Pequot Capital to Shut Amid SEC-Insider Trading Probe:

Arthur Samberg, once the world’s biggest hedge-fund manager, said a federal insider-trading investigation is forcing him to shut Pequot Capital Management Inc. more than two decades after starting its first fund.

“With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business,” Samberg wrote in a letter to clients yesterday. Pequot oversees $3.47 billion, according to a May 15 regulatory filing, down from $4.3 billion in November and $15 billion in 2001, when it was the top-ranked hedge-fund firm by assets.

The U.S. Securities and Exchange Commission in January resumed a probe into whether Samberg’s funds illegally profited in 2001 by trading on inside information about Microsoft Corp., people familiar with the matter said at the time. That was about a year after the agency told Samberg and Morgan Stanley Chief Executive Officer John Mack they wouldn’t be accused of wrongdoing related to insider trading.

So John Mack stepped down because he is soon turning 65? Yeah, right!! If you believe that, can I interest you in some toxic mortgage assets priced at 90 cents on the dollar? I think there is real value there!!

In my opinion, ‘Mack the Knife’ getting shot is an indication of the SEC flexing its muscle.

LD

  • Lenofus

    Well Congrats, Larry. You “get it”. For anyone interested, this is all on DEEPCAPTURE.COM. Aguirre’s testimony is riveting reading.

    Very pleased to see this post.

  • Warlord

    Well, well, well…the chickens are coming home to roost. Mack at one time may have had the “juice” to get Gary Aguirre fired, but it ain’t over ’till the fat lady sings. And if memory serves, given what the court has said in the matter, she’s just running through her exercises as I type this now. I can’t wait for the performance to begin!

  • AMMASS

    Mack is being forced to retire by the further embarrasment it would bring to Morgan Stanley, that firm which takes an attitude that it is always above all the rest. Well, the “mystery” that is MS will soon be resolved and the TRUTH shall win .

  • ed

    Larry; There was a story making rounds on the street on Tuesday that the MS Board was talking to Mack about announcing early retirement prior to a story that would be personally embarrassing to Mack goin public. When I saw yesterday’s announcement, my colleague on the desk looked & said “told ya”…..and yes he did.

  • Larry Doyle

    What might that story have been? I am willing to bet it was this ‘insider trading’ connection at Pequot.

    Thanks for sharing.

  • b.trout

    You must be kidding, John Mack afraid of the SEC? Get real.

  • Larry Doyle

    B. Trout….very real. In fact, check the comment from ed above as to the ‘word on the street’ about Mack.

    It is not a question of Mack or anybody else being afraid of the SEC. The SEC needs some ‘wins’ and ‘heads’ that go along with those wins. Mr. Mack is a big scalp and strong message to the rest of the boys, ‘there’s a new sheriff in town.’

    I do not think it is all that difficult to connect the dots in this case.

  • Lenofus

    This is a very different SEC. This is an SEC fighting for its very existance (I don’t know why, because if anything ever needed to die, but I digress) and there will be prosecutions. Don’t forget, they inside trade on Government computers. Any idiot (SEC Enforcement attorneys included, but I digress), know hard drives can be harvested, but they did it anyway. So, they are telling me supervisors were in on it.

    The fact that Samberg has fallen is a tremendous compliment to Aguirre. wE all owe him a big “thanks” . Jonn Mack is no better or worse than all the other scum that laughed at us, extracted riches from the poor souls of the country, and facilitated the illgal transfer of trillions to enemies of the nation. He’s just the start. But calling the SEC under the old acronym “SEC” is misleading. “SOL” is much more appropo.






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