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Great American Gary Aguirre “Cross Examines” in re: SEC’s FOIA Exemption

Posted by Larry Doyle on September 17, 2010 8:03 AM |

I truly believe this could be the single most important and enlightening commentary ever put forth at Sense on Cents. Although it is a little lengthy and has some legalese, if you care about truth, transparency, and integrity in our nation, take the time to read and review. You will be better for it. I encourage you to share it with friends and colleagues.

Washington still does not get it.

I strongly believe the deeply embedded Wall Street-Washington incestuous relationship was central to the erosion of our economic foundation. While that incest must be extirpated if we are to regain our economic standing, we continue to suffer through “show trials” dealing with the critically important topic of pursuing transparency across our political and financial landscape. Regrettably, the media in general provides limited coverage to this ongoing pursuit. To that end, I welcome banging this drum and engaging those in our nation who will ask the hard questions and put forth aggressive propositions so real transparency can be achieved. Even if the pursuit comes up short, the effort and goals are beyond worthy. Let’s navigate.

Yesterday, the House Financial Services Committee chaired by Barney Frank held a hearing to address the SEC’s exemptions from Freedom of Information requests embedded in the Financial Regulatory Reform legislation. Congressman Frank rolled out the red carpet to SEC Chair Mary Schapiro. From the testimony, Frank offers:

Chairman Schapiro, let me say I appreciate your coming and I just want
to say at the outset no one, I think, does or should consider
this in any way any kind of criticism or indictment. And I
understand you — my own view is that you have significantly
improved the enforcement mechanism. I know Mr. Grisami (ph)
(Khuzami) couldn’t be in today because of impossible conflicts. But I
welcome him and what he’s been doing. So I — I want to make
very clear, I think everybody’s made it clear, we’re here in
a spirit of cooperation. We have a common enterprise (ph). We
have conflicting goals to some extent, which is tough
enforcement, but also complete openness.

Way to take the gloves off there, Barney. Have you ever heard anybody presenting an effective “cross examination” so warmly embrace an individual providing testimony? Is this the best America gets? Let’s get real.

Who should really be questioning Ms. Schapiro? Who should make the case for the need for real transparency at the SEC? Who can ‘talk the talk’ because he has ‘walked the walk’? None other than the great American, Gary Aguirre. For those not familiar with Mr. Aguirre, he has no equal when it comes to credibility and integrity in pursuing FOIA requests from the SEC. He is a true giant. He won a wrongful termination suit against the SEC. Aguirre utilized the FOIA to obtain documentation from the SEC which led to a $28 million settlement and shut down Pequot Capital headed by the legendary Art Samberg. Aguirre recently published his thoughts on the SEC’s FOIA exemptions in the September 2010 Wall Street Lawyer. I am happy to share it with the audience here at Sense on Cents.

Aguirre opines that the legislation as written may very well be unconstitutional. While Aguirre’s commentary is written largely for those with a legal background, there are lots of lessons for all Americans. Allow me to share a few ‘appetizers’ in the hope that people will take the time to review the full 8-page document. Aguirre writes:

No other provision in the U.S. Code purports to grant any agency such unbridled discretion by declaring itself to be an Exemption 3(B) statute. In this way, § 929I appears to be a unique grant of power by Congress to a federal agency.

Don’t go anywhere as Gary Aguirre has a lot more to say, including:

However, as discussed below, Congress’s unfettered grant of power to the SEC to decide what government secrets should be disclosed to the public may raise constitutional issues.


And § 929I grants the SEC an even more extraordinary power: the ability to expand the scope of its new FOIA exemptions at will. Should the SEC believe the current form of its new exemptions is too narrow, it may expand their scope under its rule-making authority.

Hence, if the SEC decides it needs an even broader exemption under FOIA, it simply modifies its rules to broaden the exemptions’ reach.

Aguirre’s “cross examination” again presents this SEC exemption as likely unconstitutional in writing,

Hence, § 929I’s broad grant of power to the SEC appears void of any standards which would permit it to pass constitutional muster.

With such “unbridled discretion” to withhold information from FOIA requesters comes the question whether § 929I constitutes an unlawful delegation of legislative authority.

Aside from the case being made in this commentary by our great American, Mr. Aguirre, he also references that the SEC’s own Inspector General David Kotz questioned the SEC’s compliance with FOIA. On this note, Aguirre offers:

Last September, SEC Inspector General H. David Kotz issued a 60-page report (OIG FOIA Report) damning the SEC’s conscious failure to comply with FOIA. Mr. Kotz noted the SEC releases records in response to only 13% of requests, while other federal agencies do so in response to 60% of the requests.

While Aguirre presents a compelling case in his commentary as to why the SEC should be compelled to comply with FOIA, he saves his best for last. How so? Aguirre aggressively puts forth why the SEC may truly want to be further exempt from FOIA. He references his own case againt the SEC and emphasizes,

Section 929I Closes FOIA’s Path to Records of SEC Misconduct Opened by Aguirre v. SEC

In Aguirre, the author, a former SEC staff attorney, led an SEC insider trading and market manipulation investigation of Pequot Capital Management during 2004 and 2005. The SEC discharged the author in September 2005 after he complained internally that his supervisors were giving preferential treatment to a prominent Wall Street banker (LD’s edit: the banker was John Mack). In November 2006, the SEC closed the Pequot investigation without filing charges. In August 2007, the Senate Committee on the Judiciary and the Senate Committee on Finance issued a 108-page joint report in which they found the SEC (1) had been unduly deferential to the Wall Street banker and (2) had fired the author for questioning that deferential treatment.

Consequently, Aguirre provides a pathway for the media, financial writers, and the public to obtain information about the SEC’s failures, such as those which led to the financial crisis, where a plaintiff has proof of misconduct by SEC staff.

Aguirre cogently connects the dots. I will allow others to judge the merits of Mr. Aguirre’s cross-examination. I know how I feel. I love it. America needs a LOT more of what Mr. Aguirre is serving. Gary Aguirre once again distinguishes himself as a great American in this commentary. He provides the ‘cross examination’ which Frank and others are obligated to pursue.

With this commentary, Gary Aguirre gains immediate elevation into the highest echelon of the Sense on Cents Hall of Fame. I strongly encourage readers to take the 20 minutes to fully and totally review Aguirre’s paper. You will be more fully informed as to the real issues lying at the base of the Wall Street-Washington incest. (Click on the attached below to access Aguirre’s full commentary.)

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • phil trupp

    The FOIA exemption has been used by the SEC to protect the industry’s proprietary information even when that same information is the subject of criminal investigation. To exempt SEC entirely from FOIA is to throw up yet another opaque shield to discourage investigative journalists who are then forced to rely on inside “sources” and whistle blowers. It is a tactic similar to that used in various Third World courts to protect corrupt and abusive politicians. Most distressing is the complicity of congress to reinforce what it knows to be a form of unethical and perhaps unconstitutional protection for those who break the law. The SEC, with congressional approval, acts as if it is part of the defense intelligence apparatus dealing in top secret matters. This is a clear violation of the laws governing commerce in the United States. The departments of Commerce, Energy, Food and Drug, etc., have no FOIA exemption because it would be contrary to public interest. At the SEC, the position is that the “public” is the financial industry itself, and that its privacy must be protected at any cost. Is it any wonder that we are in a state of political upheaval when such practices are given a wink and a nod at the highest levels of government, including the Executive.

  • Lou

    You are right. The media and political and financial establishments do define the debates and topics for discussion. This commentary tied in with yesterday’s commentary and comments go to show how screwed up and dysfunctional our system truly is.

    I can only guess that the SEC is looking for these powers because the issues and problems within the financial system run so deep.

    Who knows? Not even “the shadow” knows.

  • Bruce

    I am convinced the upheaval mentioned by Phil above is just the beginning. Combine the financial crisis with massive unemployment and possible hyperinflation topped by massive lawsuits against Wall Street, banks, etc. and one could argue the US is ripening for civil disobedience. A scary scenario, to say the least.

    Giant problems just keep on surfacing, with no end in sight. Each one begins with someone making a bad ethical/moral choice.

    • phil trupp


      Well said. The creative lines of commerce, of ethical behavior, of moral connectedness shift each day. The moneyed elite are disconnected; they live in their own world and obey their own rules. The political power structure has turned to quicksand, the most troubling part of which is a seeming lack of a bottom. I know from personal experience that you do not escape a real life quicksand pit on your own. Now, as I look around me, I see very few helping hands; frightened face, yes, I see plenty of those bewildered looks. This isn’t meant as a doomsday lecture, but rather it is a warning. Our country will right itself at some point in the future. The fear is how much damage will be done in the interim, and how much will be irreparable?

  • Rob

    The reason behind this exemption can be traced to Dodd and Frank themselves. These two weren’t saints during the housing boom and the trail of dirt is now covered by a mile of disclosure exemptions. I got to admit that if the dirt that Dodd and Frank engaged in ever came out whatever confidence left in the market would be washed away.

    • phil trupp


      Your last line is harsh truth. The reality sucks.

  • Steve

    Throw Schapiro out and replace her with Gary Aguirre!!!

    • Tea Party

      I second this motion!! All in favor say, “Aye”.

      Aye,aye, aye, aye, aye…..!!!

  • TeakWoodKite

    Thank you LD. I love good weekend reading.

  • Patriot

    What else might Mr. Aguirre know that he can share with America? I have to believe he must still have some moles inside the SEC who would be willing to talk.

  • chris

    Wikileaks is the only way the common man can put fear into Wall Street. All other methods have been tried.

    Tell anyone and everyone you know on Wall Street to provide docs to Wikileaks. Wikileaks doesn’t WANT to know your identity when you leak docs.

    Wikileaks the Fed too, to see what nonsense they’ve been up to.

    • LD


      Thanks for the info on Wikileaks,

      Here is the link.

  • Please take a few minutes to read my public comment to the Securities Exchange Commission regarding the new Dodd-Frank financial regulations:

    Be sure to check out the attached files #1 & #2 at the bottom of the comment page.

    Since posting this letter both the House and the Senate have voted to repeal SECrecy. Late last week, the White House would not comment on whether Obama would veto the repeal of SECrecy. While at the UN Obama said “we will call out those who suppress ideas”.

    Please share this your staff, writers, reporters, friends, neighbors and associates. If you have any suggestions on how others can be made aware of this situation, I will gladly accept your recommendations.

    Have a great day!

    Joe Jefferis
    Dayton, OH

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