Anchor ads are not supported on this page.

4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Gary Aguirre case,– embarrassment for SEC

Self-probe– ha!

The Securities and Exchange Commission, the federal agency that is supposed to protect investors from Wall Street predators, says it is going to investigate how it missed the Bernie Madoff scam. San Diego’s Gary Aguirre, speaking from personal experience, knows that’s impossible. Any securities agency probe will be a cover-up.

New York’s Madoff ran a $50 billion Ponzi scheme. The securities commission admits that allegations about Madoff’s scheme had been repeatedly brought to the agency’s attention since 1999. “I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations,” proclaimed the agency’s Bush-era chairman, Christopher Cox, last month, announcing the supposed self-probe.

Balderdash. The only thing Cox is “gravely concerned” about is that the American public might finally understand the agency’s actual mission. For as Aguirre, a former attorney for the agency, points out, the Securities and Exchange Commission (SEC) does not exist to protect investors from Wall Street predators. It exists to protect powerful Wall Street predators from investors.

The notion that the agency can probe its own officials is hilarious — a real knee-slapper. In late December, Senator Arlen Specter (R-PA) heaped scorn on the securities agency’s ability to investigate itself in the Gary Aguirre case. Now the agency says it will open that probe again. “Reopening the investigation marks a new embarrassment for the beleaguered S.E.C., suggesting that, as in the Bernard Madoff case, it may have failed earlier to follow up adequately on strong indications of possible wrongdoing,” says Portfolio.com.

Sponsored
Sponsored

Aguirre puts it more strongly: the securities agency “cannot be trusted with an investigation of itself, especially when the investigation [involves] the highest levels of the SEC.”

Aguirre’s case lays bare everything that the securities agency is: a whorehouse catering to Wall Street’s elite. After a long and successful career practicing law in San Diego, Aguirre, brother of former City Attorney Mike Aguirre, decided to try public service. He joined the agency and began looking into a possible insider-trading case. A hedge fund, Pequot Capital Management, had made a bundle buying up stock in a firm just before the announcement that the firm would be acquired by another company. Pequot had also made money betting that the stock of the acquiring company would go down, as is normal. Before Pequot made those bets, John Mack, the hedge fund’s former chairman and a current investor, had talked with both the investment banking firm handling the acquisition and with Pequot’s current chairman, a close personal friend.

Aguirre wanted to interview Mack. But his boss said Mack had big Washington connections — specifically, to President George W. Bush. Aguirre protested. Just weeks after he had been given a strongly positive job review, Aguirre was fired. The Senate’s Committee on Finance and Committee on the Judiciary did a 108-page study on the matter.

There were some hair-raising findings. While Aguirre was trying to get the Mack interview, an attorney at the Debevoise and Plimpton law firm sent Paul Berger, Aguirre’s boss, an email with the opening words “Yowza!” It described how an ex-SEC lawyer could make $2 million a year with the firm. One of the top attorneys at the Debevoise firm contacted a senior official of the securities agency on behalf of Mack and behind Aguirre’s back. After he fired Aguirre, Berger took a job with Debevoise. Similar quid pro quos are called the “revolving door” phenomenon — agency officials do dirty work while at the commission and then go with a big law firm representing the crooks who got off. Mack wiggled off the hook and went on to become chief executive of Wall Street’s Morgan Stanley.

The two Senate committees vindicated Aguirre, denouncing his firing and concluding it was logical that he interview Mack. Then the agency’s inspector general, H. David Kotz, authored a 191-page study of the case. Kotz basically agreed with the two Senate committees. He recommended that the agency discipline its enforcement director and one other official. Kotz, too, blasted the ease by which the Wall Street law firm got special access to securities agency officials. He questioned the “impartiality and fairness” of the agency’s handling of the Mack investigation and firing of Aguirre.

Then the agency’s cover-your-ass team went into action. An administrative law judge, one Brenda Murray, was assigned to second-guess Kotz’s report. Just a few weeks later, her 15-page paper exonerated the two officials who Kotz said should be disciplined. Kotz was shocked and said so publicly.

Now we get to the heart of the agency’s double-dealing. As Senator Specter stated, Brenda Murray “was described in press accounts as an administrative law judge, and it was not until further inquiry that the SEC admitted she was not acting in a judicial capacity in issuing her decision.” In short, the agency picked a loyal staffer who happened to have the title “administrative law judge” and had her exonerate the officials who had been sharply criticized by the Senate committees and by the inspector general. But she was not acting as a judge at all — just a soldier taking orders.

Murray’s quickie report “was completely irregular in every detail,” says Aguirre. “It was outside the jurisdiction of an administrative law judge. The SEC pulled a scam.”

Senator Charles Grassley (R-Iowa), who spearheaded the investigation with Specter, said, “[I]t looked like the lawyers for the wrongdoers wrote the decision.”

Columnist Bruce Carton of Compliance Week wrote that agency staffers were stunned at the whitewash; Murray did not use the standard procedures for reviewing an internal-discipline recommendation. “Murray made her decision that discipline was not appropriate based almost exclusively on the one-sided information she received from counsel for the various subjects,” wrote Carton. “This information was not subject to any cross-examination or any follow-up by the [inspector general’s] office or other parties involved, and additionally was not provided under oath.”

One prominent attorney said that in Murray’s whitewash, the securities agency had merged “the functions of prosecutor, judge, jury, and appellate tribunal” under the same roof.

It gets even worse. One reason the Pequot case is being reopened is that a divorce suit has revealed that the hedge fund agreed to pay $2.1 million to a former Microsoft employee who was apparently feeding information on his former employer. “Pequot made a boatload of money” betting on Microsoft securities, based on such information, says Aguirre, but the agency found a way to drop the Microsoft angle of the investigation. But Aguirre has come up with new facts that have forced the agency to reopen the probe.

There’s more: In the same report in which she cleared Aguirre’s nemeses, Brenda Murray vindicated an agency official who closed an investigation into the derivatives dealings of Wall Street’s Bear Stearns in 2007. Early the next year, the Wall Street firm was rescued from bankruptcy when it was forced into J.P. Morgan, backed by $29 billion of federal money. Bear’s derivatives gambling was to blame. The agency missed it and then exonerated itself.

And the agency is going to look into whether it did its job properly in the Madoff case? Come now.

Here's something you might be interested in.
Submit a free classified
or view all
Previous article

OSHA rules wall falls our fault

Who, U.S.?
Next Article

Summit Fellowship wants to be a home of belonging

Unitarian Universalism allows you to be exactly who you are in the moment

The Securities and Exchange Commission, the federal agency that is supposed to protect investors from Wall Street predators, says it is going to investigate how it missed the Bernie Madoff scam. San Diego’s Gary Aguirre, speaking from personal experience, knows that’s impossible. Any securities agency probe will be a cover-up.

New York’s Madoff ran a $50 billion Ponzi scheme. The securities commission admits that allegations about Madoff’s scheme had been repeatedly brought to the agency’s attention since 1999. “I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations,” proclaimed the agency’s Bush-era chairman, Christopher Cox, last month, announcing the supposed self-probe.

Balderdash. The only thing Cox is “gravely concerned” about is that the American public might finally understand the agency’s actual mission. For as Aguirre, a former attorney for the agency, points out, the Securities and Exchange Commission (SEC) does not exist to protect investors from Wall Street predators. It exists to protect powerful Wall Street predators from investors.

The notion that the agency can probe its own officials is hilarious — a real knee-slapper. In late December, Senator Arlen Specter (R-PA) heaped scorn on the securities agency’s ability to investigate itself in the Gary Aguirre case. Now the agency says it will open that probe again. “Reopening the investigation marks a new embarrassment for the beleaguered S.E.C., suggesting that, as in the Bernard Madoff case, it may have failed earlier to follow up adequately on strong indications of possible wrongdoing,” says Portfolio.com.

Sponsored
Sponsored

Aguirre puts it more strongly: the securities agency “cannot be trusted with an investigation of itself, especially when the investigation [involves] the highest levels of the SEC.”

Aguirre’s case lays bare everything that the securities agency is: a whorehouse catering to Wall Street’s elite. After a long and successful career practicing law in San Diego, Aguirre, brother of former City Attorney Mike Aguirre, decided to try public service. He joined the agency and began looking into a possible insider-trading case. A hedge fund, Pequot Capital Management, had made a bundle buying up stock in a firm just before the announcement that the firm would be acquired by another company. Pequot had also made money betting that the stock of the acquiring company would go down, as is normal. Before Pequot made those bets, John Mack, the hedge fund’s former chairman and a current investor, had talked with both the investment banking firm handling the acquisition and with Pequot’s current chairman, a close personal friend.

Aguirre wanted to interview Mack. But his boss said Mack had big Washington connections — specifically, to President George W. Bush. Aguirre protested. Just weeks after he had been given a strongly positive job review, Aguirre was fired. The Senate’s Committee on Finance and Committee on the Judiciary did a 108-page study on the matter.

There were some hair-raising findings. While Aguirre was trying to get the Mack interview, an attorney at the Debevoise and Plimpton law firm sent Paul Berger, Aguirre’s boss, an email with the opening words “Yowza!” It described how an ex-SEC lawyer could make $2 million a year with the firm. One of the top attorneys at the Debevoise firm contacted a senior official of the securities agency on behalf of Mack and behind Aguirre’s back. After he fired Aguirre, Berger took a job with Debevoise. Similar quid pro quos are called the “revolving door” phenomenon — agency officials do dirty work while at the commission and then go with a big law firm representing the crooks who got off. Mack wiggled off the hook and went on to become chief executive of Wall Street’s Morgan Stanley.

The two Senate committees vindicated Aguirre, denouncing his firing and concluding it was logical that he interview Mack. Then the agency’s inspector general, H. David Kotz, authored a 191-page study of the case. Kotz basically agreed with the two Senate committees. He recommended that the agency discipline its enforcement director and one other official. Kotz, too, blasted the ease by which the Wall Street law firm got special access to securities agency officials. He questioned the “impartiality and fairness” of the agency’s handling of the Mack investigation and firing of Aguirre.

Then the agency’s cover-your-ass team went into action. An administrative law judge, one Brenda Murray, was assigned to second-guess Kotz’s report. Just a few weeks later, her 15-page paper exonerated the two officials who Kotz said should be disciplined. Kotz was shocked and said so publicly.

Now we get to the heart of the agency’s double-dealing. As Senator Specter stated, Brenda Murray “was described in press accounts as an administrative law judge, and it was not until further inquiry that the SEC admitted she was not acting in a judicial capacity in issuing her decision.” In short, the agency picked a loyal staffer who happened to have the title “administrative law judge” and had her exonerate the officials who had been sharply criticized by the Senate committees and by the inspector general. But she was not acting as a judge at all — just a soldier taking orders.

Murray’s quickie report “was completely irregular in every detail,” says Aguirre. “It was outside the jurisdiction of an administrative law judge. The SEC pulled a scam.”

Senator Charles Grassley (R-Iowa), who spearheaded the investigation with Specter, said, “[I]t looked like the lawyers for the wrongdoers wrote the decision.”

Columnist Bruce Carton of Compliance Week wrote that agency staffers were stunned at the whitewash; Murray did not use the standard procedures for reviewing an internal-discipline recommendation. “Murray made her decision that discipline was not appropriate based almost exclusively on the one-sided information she received from counsel for the various subjects,” wrote Carton. “This information was not subject to any cross-examination or any follow-up by the [inspector general’s] office or other parties involved, and additionally was not provided under oath.”

One prominent attorney said that in Murray’s whitewash, the securities agency had merged “the functions of prosecutor, judge, jury, and appellate tribunal” under the same roof.

It gets even worse. One reason the Pequot case is being reopened is that a divorce suit has revealed that the hedge fund agreed to pay $2.1 million to a former Microsoft employee who was apparently feeding information on his former employer. “Pequot made a boatload of money” betting on Microsoft securities, based on such information, says Aguirre, but the agency found a way to drop the Microsoft angle of the investigation. But Aguirre has come up with new facts that have forced the agency to reopen the probe.

There’s more: In the same report in which she cleared Aguirre’s nemeses, Brenda Murray vindicated an agency official who closed an investigation into the derivatives dealings of Wall Street’s Bear Stearns in 2007. Early the next year, the Wall Street firm was rescued from bankruptcy when it was forced into J.P. Morgan, backed by $29 billion of federal money. Bear’s derivatives gambling was to blame. The agency missed it and then exonerated itself.

And the agency is going to look into whether it did its job properly in the Madoff case? Come now.

Comments
Sponsored
Here's something you might be interested in.
Submit a free classified
or view all
Previous article

Nation’s sexy soldiers stage protest at Pendleton in wake of change in Marine uniform policy

Semper WHY?
Next Article

Reader Music Issue short takes

Obervatory's mosh pit, frenetic Rafael Payare, Lemonhead chaos, bleedforthescene, Coronado Tasting Room
Comments
Ask a Hipster — Advice you didn't know you needed Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Drinks All Around — Bartenders' drink recipes Excerpts — Literary and spiritual excerpts Feast! — Food & drink reviews Feature Stories — Local news & stories Fishing Report — What’s getting hooked from ship and shore From the Archives — Spotlight on the past Golden Dreams — Talk of the town The Gonzo Report — Making the musical scene, or at least reporting from it Letters — Our inbox Movies@Home — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Outdoors — Weekly changes in flora and fauna Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Sheep and Goats — Places of worship Special Issues — The best of Street Style — San Diego streets have style Surf Diego — Real stories from those braving the waves Theater — On stage in San Diego this week Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close

Anchor ads are not supported on this page.