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The Securities and Exchange Commission today (May 27) put out a bland press release saying that Pequot Capital Management, once the largest hedge fund, and its head, Arthur Samberg, have agreed to pay $28 million to settle agency insider trading charges. Samberg has been barred from the investment business; he has already announced he is shutting down the hedge fund. The SEC would rather the public didn't learn the whole story, because it shows the corruption of hedge funds and the prostitution of the SEC. Much of this story has already been told in my columns and on this blog, but new information surfaced today.

San Diegan Gary Aguirre says he provided the information on this insider trading scandal to the SEC, FBI, two Senate investigative committees and the SEC's internal inspector. Originally, Aguirre, then an SEC employee, was looking into possible Pequot insider trading that might have implicated Wall Street powerhouse John Mack, head of Morgan Stanley. There was reason to believe that Mack, a former official of Pequot, had passed information on a pending corporate acquisition to Samberg, his close friend. Pequot made a bundle when the acquisition was consummated. Aguirre wanted to interview Mack. His boss told him that Mack was too powerful, and was a big donor to President George W. Bush. Law firms went far above Aguirre's head to the top of the agency on Mack's behalf. Aguirre was fired. He went to two Senate committees, along with the SEC's internal investigator; all studied the matter and agreed that Mack should have been interviewed and the firing was unjustified. In 2005, Aguirre found out that Samberg had a secret source within Microsoft who was feeding him information about that company. This is the matter that the SEC belatedly addressed today. However, the SEC closed the entire investigation into Pequot in 2006. It was shutting the door on 17 investigations of Pequot for classic insider trading in 19 companies, as well as specialized insider trading in another 101. Later, Aguirre came back with a copy of an email that was "too much for the SEC to ignore," he says. The agency was forced to look into the matter again.

Aguirre has included other emails in a public filing he recently made in a case he has against the SEC. Nine years ago, Samberg was getting ready to hire David Zilkha, a Microsoft employee. Wrote Samberg to Zilkha in 2001, "I'm not impressed with our research on [Microsoft.] Do you have any current views that could be helpful? Might as well pick your brain before you go on the payroll!!!" Later, Samberg specifically asked for "tidbits" from Zilkha about a specific Microsoft quarter, which had not yet been announced. Later, just before Zilkha joined Pequot, Samberg wrote him and said, "I shouldn't say this, but you have probably paid for yourself already!" Later, after Zilkha arrived, Samberg told his staff members that Zilkha had already earned his keep at Pequot. Aguirre gathered more emails in 2008. Today, the SEC finally acted on part of the investigation it had once closed. It brought a civil claim against Zillkha, stating that he concealed his actions during an earlier probe. Aguirre is pushing for more.

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Comments

a2zresource May 27, 2010 @ 5:42 p.m.

You did make a response to a previous comment of mine regarding SEC personnel having the time to look at porn all day long when they should have been finding meaningful things to do. I believe you said that their superiors at SEC really didn't want them investigating with vigor... at least that was the impression I got.

The Bumbling Petroleum Gulf mess now may be a case of too much closeness between an agency and the corporations it was supposed to regulate. Obviously, it is not the only example of this problem around. I have my own stories of public utilities and the California Department of Toxic Substance Control resulting in an increasing number of mesothelioma lawyers interested in Southeast San Diego and Lemon Grove, but none of all that rivals this tale of aimless inactivity at SEC regarding the largest hedge fund it was supposedly monitoring.

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Don Bauder May 27, 2010 @ 7:33 p.m.

Response to post #1: I don't think lethargy or an inordinate interest in pornography thwarted the investigation of Pequot. The hedge fund was just too big for the SEC to look at. And it would never look at someone as powerful as John Mack. With all the scandals surfacing (e.g. Madoff), the agency is trying to be more responsible, but the improvement is not impressive. And you are exactly right: it's the same with petroleum regulation. The oil companies control the regulators -- in fact, hold out the possibility of hiring them as a way to get away with murder. Best, Don Bauder

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SurfPuppy619 May 27, 2010 @ 8:50 p.m.

You did make a response to a previous comment of mine regarding SEC personnel having the time to look at porn all day long when they should have been finding meaningful things to do.

LOL..

Believe it or not, in the mind of some gov employees, looking at porn is a meaningful use of time to the them.

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Don Bauder May 27, 2010 @ 9:16 p.m.

Response to post #3: Why not? They're screwing the public. Best, Don Bauder

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MURPHYJUNK May 31, 2010 @ 9:27 a.m.

Response to post #3

at least its time spend not messing things up further

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Don Bauder May 31, 2010 @ 7:02 p.m.

Response to post #5: That's one way to look at it. Best, Don Bauder

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