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SEC Settles with Great American Gary Aguirre, or Wall Street-Washington Incest Personified RECOMMENDED

Posted by Larry Doyle on June 29, 2010 1:15 PM |

Thanks very much to a regular reader of Sense on Cents for sharing a fascinating story. The Government Accountability Project just released the following story regarding a significant settlement paid by the SEC to a former SEC attorney Gary Aguirre. This story highlights the Wall Street-Washington incest to the ‘nth’ degree. Will the media pick this story up and highlight it? They should.

With the details provided in this story, Gary Aguirre clearly shows himself to be a great American and as such earns immediate induction into the Sense on Cents Hall of Fame. The General Accountability Project reports SEC Settles with Aguirre:

In what may be the largest settlement of its kind, the Securities and Exchange Commission (SEC) has agreed to pay $755,000 to settle the wrongful termination claim of Gary J. Aguirre, the attorney who headed the SEC’s insider trading investigation of Pequot Capital Management until his firing in September 2005.

A judge with the Merit Systems Protection Board (MSPB), the federal agency with jurisdiction over Aguirre’s termination claim, issued an order today finalizing the settlement. The settlement sum equals Aguirre’s pay for four years and ten months (the elapsed period since his September 2005 discharge), plus his attorneys’ fees. Aguirre agreed to dismiss two related cases against the SEC.

Government Accountability Project Legal Director Tom Devine stated “Unfortunately, this large settlement is the exception that proves the rule. Until Congress provides real protections for financial regulatory employees such as Aguirre, existing law will remain the best excuse for government regulators to turn a blind eye.”

The SEC’s settlement with Aguirre comes one month after the SEC filed insider trading charges against Pequot, its founder, Arthur Samberg, and David Zilkha, a former Pequot employee, based on facts uncovered by Aguirre. Pequot and Samberg paid the SEC $28 million to settle the charges against them. The case against Zilkha continues.

In August 2007, two Senate committees published a scathing 108-page report criticizing the SEC’s decision to fire Aguirre and close the Pequot investigation, which included Pequot’s suspected insider trading in securities of 20 publics companies.

The Senate report chronicles Aguirre’s promising career at the SEC, including management’s decision to give him a two-step pay raise at the end of his first year for “consistently [going] the extra mile, and then some.”

But the praise vanished when Aguirre tried to subpoena an elite Wall Street banker, John Mack. His supervisors blocked the subpoena, telling Aguirre that Mack had “juice” and “political clout.”

Spell that “Wall Street-Washington incest” at its finest!!

Aguirre’s July 27, 2005, email to his supervisors explained why the Mack subpoena was essential and expressed concern that “treating Mack differently is [not] consistent with the Commission’s mission.” The Senate Report tells what happened next: “Just days after Aguirre sent an e-mail to Associate Director Paul Berger detailing his allegations, his supervisors prepared a negative re-evaluation outside the SEC’s ordinary performance appraisal process.”

One month later, the SEC fired him without warning. The Senate report concluded that Aguirre’s “termination appears to be merely the culmination of the process of reprisal that began with the August 1 re-evaluation.”

Approximately one year after the Senate report, SEC Inspector General H. David Kotz delivered his own report on Aguirre’s firing to then-SEC Chairman Christopher Cox. Kotz recommended that Aguirre’s supervisors be disciplined. To date, neither the current SEC Chairman, Mary Schapiro, nor Cox, has done so.

Why not? The smell of incest continues to reign. Where is the real leadership necessary at the head of the SEC?

The Pequot investigation appeared to have run its course when the SEC released its “Case Closing Report” in December 2006, explaining its decision to close the entire investigation, including Pequot’s trading in Microsoft options, without filing charges.

But Aguirre did not stop his Pequot investigation. He continued to collect and piece together the evidence that Samberg had used illegal tips to trade options on Microsoft stock. In April 2008, Aguirre obtained a court order forcing the SEC, over its objection, to turn over to him key records of its Pequot investigation.

Aguirre clearly embodies the drive and determination possessed by truly great Americans. I commend him.

In late 2008, Aguirre uncovered the last pieces of evidence necessary to prove an insider trading charge against Pequot, Samberg, and Zilkha. On January 2, 2009, Aguirre sent a letter to SEC Chairman Cox enclosing the new evidence.

Aguirre’s 16-page letter explained how this new evidence, when combined with the evidence uncovered by him in 2005, proved that Samberg had used illegal tips in directing trades in Microsoft options, generating $14.2 million in profits to Pequot hedge funds under his management. But still the SEC would not file a case.

On May 26, 2010, Aguirre filed papers in his FOIA case seeking an order directing the SEC to release additional Pequot records to him. He argued the SEC had to turn over the records under FOIA, because it had filed no case against Pequot or anyone else. Early the next morning, the SEC filed charges against Pequot, Samberg, and Zilkha. The allegations closely track the facts stated in Aguirre’s January 2, 2009 letter.

Asked how he feels about the settlement, Aguirre replied, “I think it’s fair to the public that the SEC pays for my work over the past four years and ten months, since it generated $28 million to the U.S. Treasury. But it’s a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what Wall Street elite needed to hear at the perfect moment: the SEC goes after big fish too.”

Gary Aguirre, a great American!!

Mary Schapiro? Chris Cox? Washington establishment? John Mack? Art Samberg? ….gutless!!


Thanks again to our Sense on Cents friend who shared this story. Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook!!

  • Duke

    Gary Aguirre, what a stud!! This is truly a phenomenal story from so many angles.

    Great to see Cox and Schapiro stood up for justice. What cowards!!

    This story truly deserves to spread across the nation.

  • Bob

    …and why is Mary Schapiro the head of the SEC?

    Bring back Gary Aguirre and make him the head of the SEC. Sounds like he has the necessary internal and intestinal attributes to do what needs to be done.

    John Mack? Any doubt any longer why he was canned at Morgan Stanley?

  • Jim

    Why is Aguirre only paid what he would have earned. This guy deserves real damages. The SEC generates a $28 million payday and Aguirre only earns what would have been his salary. Something is wrong with that picture. He deserves a LOT more than that because without his work that $28 million is not coming in.

    I think he should get $9 million or 1/3rd of the fine. He did get his name back so that is more important but he deserves that and more.

  • Steve

    Mary Schapiro can “talk the talk” but if she chooses not to discipline those involved in the firing of Gary Aguirre she shows that she can’t “walk the walk.”

    Does she not think that America can not and does not see right through the charade she is playing?

    Transparency? The only thing transparent at the SEC is the gross incompetence.

  • Fire Mary Schapiro

    Great to hear that Gary Aguirre was made whole but HOW MANY other attorneys choose not to pursue financial crimes due to the issues highlighted in this case.

    Unless our chief regulators properly punish those who are engaged in these practices, even if they have already left an agency, then the crimes and transgressions will continue.

    What is the head of the SEC supposed to do? Lead. If Schapiro chooses not to lead, then get the hell out of the way and let somebody in there who will.


  • disenchanted

    We need more Gary Aguirres. How can we coax him into digging his teeth into the Amerivet suit and Judge Rakoff’s ruling. Just for the reason he was fired, the entire industry is in the same position. If there were protection, or insurance against retribution, you would be surprised how many Mr. Aguirres would come out of the wood work.As the heads of these commissions and agencies just keep moving from one to the other, there will never be freedom of speech and true investigations. These top officials have to protect their jobs and their name. For that reason they can’t allow anyone new in the door.

  • Sparky

    Hat’s off to Gary Aguirre not only for a job well done, but also for the tenacity to stay the course.

    But what about the biggest fish of all, the infamous John J Mack?!

    Mack got away with thievery and remains free as a bird; free to continue operating the slippery way he always has!

    And what about the obviously-corrupted management team – a phrase I use very loosely – that deliberately blocked Gary Aguirre at every pass? Why haven’t these thugs been dealt with? This reeks of corruption and is clearly unacceptable!

    With this sort of cover-up crap happening high up within the primary regulatory agency formed to supposedly prevent such garbage; is it any wonder why the public now correctly perceives Wall Street as the sewerage system it is?

    Also, we should all be asking these important and relevant questions: Why is Gary Aguirre receiving only a paltry $ 755,000 when the SEC walked away with a cool $ 28 million that it never would have seen a dime of had it not been for his efforts? And, what about the $ 19 million or so that Pequot Capital Management made trading on insider knowledge of the GE Capital-Heller Financial merger; knowledge illegally provided by crooked tipper John J Mack?

    Mary Shapiro, if after this mess you still do not believe it is necessary to CLEAN HOUSE, then in the opinion of this seasoned observer you should promptly step down!

    With Much Deserved Disgust,


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