Thursday, July 01, 2010

SEC Settles with Fired Investigator

The Washington Post reports that the SEC has paid fired investigator Gary Aguirre $755,000 to end his wrongful termination lawsuit, stemming from his cancelled probe of Pequot Capital fraud allegations in 2006.
Aguirre accused the agency of botching a probe into the prominent hedge fund Pequot Capital Management, saying the SEC was overlooking clear signs he uncovered that the firm traded in shares of Microsoft based on insider information. Aguirre also accused the agency of firing him after he pushed, unsuccessfully, to interview Morgan Stanley's then chief executive, John Mack, as part of the Pequot probe. Aguirre argued that the agency didn't want to interview the Wall Street giant because of his "political clout."

The agency fired Aguirre for insubordination and closed the case on Pequot.

But Aguirre's protests led to two internal investigations by the SEC's inspector general into the handling of the Pequot matter and a scathing Senate report that found that the agency bungled the probe and improperly fired Aguirre. Internal documents show the agency's efforts to discredit Aguirre included discussion of a "basket case" strategy that made him seem like a longtime agency gadfly. The former enforcement lawyer, meanwhile, pursued a private legal claim for wrongful termination.

Recently, the agency changed its tune on two counts.

After new evidence came to light in the Pequot case, the SEC opened a new probe and last month settled insider-trading charges with the firm. Pequot and its chief executive, Arthur Samberg, agreed to pay $28 million to settle SEC charges that the firm traded shares of Microsoft based on insider information.

And Tuesday, the SEC agreed to a settlement, finalized by the Merit Systems Protection Board, to pay Aguirre four years and 10 months of salary and attorney's fees in exchange for Aguirre dismissing his claims.

"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," Aguirre said. "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."
Since Chris Cox was chairman of the SEC at this time, and the firing of an investigator must have created a hostile environment for those seeking to root out fraud, perhaps someone might take a closer look at Cox's role in Aguirre's firing, as well as his responsibility for the collapse of the US financial system in a climate of widespread fraud and abuse?