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Snug and Smug at the Hotel Del

The Del is set to host a conference dealing with Wall Street whistle-blowers.
The Del is set to host a conference dealing with Wall Street whistle-blowers.

Gary Aguirre heads a San Diego law firm that since February has specialized in representing whistle-blowers, those who blow the whistle on financial fraud — often inside the companies they work for — and government employees who see wrongdoing within their agencies.

On January 20 at the Hotel del Coronado, a panel of nationally known securities silk-suiters will hold a seminar on what to do about whistle-blowers. Aguirre won’t be there. One reason is that he has blown the whistle loudly on some of those panelists while he battled the federal Securities and Exchange Commission.

More than almost anybody, Aguirre has publicly stated how this commission, born in the 1930s to protect the public from Wall Street, now protects Wall Street from the public. The mechanism is what Aguirre calls the “rotating door.” A law firm will dangle a juicy job in front of a securities commission lawyer who is investigating the law firm’s client. The rascal gets off and — voilà! — the agency lawyer gets a $2-million-a-year job with the law firm.

This works the other way, too. When the securities agency is looking for a lawyer to run its enforcement division, it is likely to select one from a powerful Wall Street law firm rather than from within its own ranks. These private-sector attorneys who take lofty temporary posts at the agency “are Wall Street players on sabbatical at the SEC,” says Aguirre.

This month, “the rotating door comes to San Diego,” says Aguirre. The 39th-annual Securities Regulation Institute will be held at the Hotel Del January 18–20. The seminar focusing on whistle-blowers will be from 9:00 to 10:30 a.m. January 20.

The panelists are Robert Khuzami, director of enforcement of the securities commission, formerly an attorney for the German giant Deutsche Bank; Richard Walker, a former securities-agency enforcement director who is now general securities counsel for Deutsche Bank; and Stephen Cutler, still another former enforcement director who is now general counsel at Wall Street’s JPMorgan Chase.

Mary Jo White of the Wall Street law firm Debevoise & Plimpton will moderate. She was once the U.S. attorney for the Southern District of New York, which prosecutes criminal securities cases.

You can see a pattern here. Some call it “Wall Street–Washington incest.” As Aguirre explains, this incestuous relationship between the regulators and the regulated is a major reason the Securities and Exchange Commission lets the Bernie Madoffs of the world off the hook.

As Matt Taibbi wrote in the August 17 issue of Rolling Stone, the route by which Walker left the securities agency and landed the remunerative job at Deutsche Bank is redolent of the rotating door. In 2000, Darcy Flynn, one of Aguirre’s current clients, was on a securities-agency team of investigators looking into possible violations by Deutsche Bank. Its chief executive had told the press that Deutsche Bank was not interested in acquiring New York–based Bankers Trust. The bank’s stock plunged on the news; ergo, Deutsche Bank could buy it at a lower price. It eventually bought it. Investigators considered the case a slam dunk. Deutsche Bank took the usual course: it hired still another former securities-agency enforcement chief, Gary Lynch, to argue the institution’s case.

Suddenly, commission investigators got word that Walker, the agency’s head of enforcement, had recused himself from the case, and two weeks later the inquiry was jettisoned. It soon became obvious why: Walker was named general counsel of Deutsche. Wrote Taibbi, “Less than 10 weeks after the SEC shut down its investigation of the bank, the agency’s director of enforcement was handed a cushy, high-priced job at Deutsche.”

Then, in 2004, Walker hired a young federal prosecutor to become his protégé at Deutsche. His name: Robert Khuzami.

Well, it came to pass that on May 18 of this year, Khuzami, now himself head of enforcement at the securities commission, shot out a mass email to agency staffers saying he wanted examples of “lawyers behaving badly.” Actually, Khuzami wanted examples of outside lawyers misbehaving.

But Flynn thought Khuzami wanted examples of wayward attorneys inside the Securities and Exchange Commission. So Flynn sent him a decade-old example: the dumping of the Deutsche Bank investigation right before Walker departed as enforcement chief to become a lawyer for the big German bank.

“When Flynn sent his letter to Khuzami complaining about misbehavior by Walker, he was calling out Khuzami’s own mentor,” wrote Taibbi.

Flynn has gone on to become a nationally famous whistle-blower and still has a job at the agency, thanks in part to Aguirre. In July, Flynn told Congress that the Securities and Exchange Commission since 1993 has been destroying information on so-called “Matters Under Inquiry,” or preliminary look-sees into possible securities fraud. The agency earlier had worked out an arrangement with the National Archives and Records Administration that all records, including those related to preliminary investigations, should be maintained for 25 years. But the securities commission has ignored — possibly illegally — this agreement.

It has destroyed preliminary files on Ponzi schemer Bernie Madoff, the now-bankrupt Lehman Brothers, and beleaguered Goldman Sachs, among many miscreants.

That’s why Flynn, knowing the agency’s proclivity for getting revenge on whistle-blowers, hired Aguirre. Senator Chuck Grassley, senior Republican on the Senate Judiciary Committee, believes the Securities and Exchange Commission “might have sanctioned some level of case-related document destruction.”

Back in 2005, Aguirre worked for the securities commission and was fired after he wanted to pursue an insider trading case against a Wall Street hotshot. Grassley’s committee, and one other Senate committee, along with the agency’s inside investigator, sided with Aguirre in the matter. He got a generous settlement from the agency. And who do you think stabbed Aguirre in the back when he wanted to go after the hotshot? Mary Jo White, the ex–government prosecutor, now big-shot Wall Street lawyer, who will moderate the whistle-blowing seminar at the Del.

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The Del is set to host a conference dealing with Wall Street whistle-blowers.
The Del is set to host a conference dealing with Wall Street whistle-blowers.

Gary Aguirre heads a San Diego law firm that since February has specialized in representing whistle-blowers, those who blow the whistle on financial fraud — often inside the companies they work for — and government employees who see wrongdoing within their agencies.

On January 20 at the Hotel del Coronado, a panel of nationally known securities silk-suiters will hold a seminar on what to do about whistle-blowers. Aguirre won’t be there. One reason is that he has blown the whistle loudly on some of those panelists while he battled the federal Securities and Exchange Commission.

More than almost anybody, Aguirre has publicly stated how this commission, born in the 1930s to protect the public from Wall Street, now protects Wall Street from the public. The mechanism is what Aguirre calls the “rotating door.” A law firm will dangle a juicy job in front of a securities commission lawyer who is investigating the law firm’s client. The rascal gets off and — voilà! — the agency lawyer gets a $2-million-a-year job with the law firm.

This works the other way, too. When the securities agency is looking for a lawyer to run its enforcement division, it is likely to select one from a powerful Wall Street law firm rather than from within its own ranks. These private-sector attorneys who take lofty temporary posts at the agency “are Wall Street players on sabbatical at the SEC,” says Aguirre.

This month, “the rotating door comes to San Diego,” says Aguirre. The 39th-annual Securities Regulation Institute will be held at the Hotel Del January 18–20. The seminar focusing on whistle-blowers will be from 9:00 to 10:30 a.m. January 20.

The panelists are Robert Khuzami, director of enforcement of the securities commission, formerly an attorney for the German giant Deutsche Bank; Richard Walker, a former securities-agency enforcement director who is now general securities counsel for Deutsche Bank; and Stephen Cutler, still another former enforcement director who is now general counsel at Wall Street’s JPMorgan Chase.

Mary Jo White of the Wall Street law firm Debevoise & Plimpton will moderate. She was once the U.S. attorney for the Southern District of New York, which prosecutes criminal securities cases.

You can see a pattern here. Some call it “Wall Street–Washington incest.” As Aguirre explains, this incestuous relationship between the regulators and the regulated is a major reason the Securities and Exchange Commission lets the Bernie Madoffs of the world off the hook.

As Matt Taibbi wrote in the August 17 issue of Rolling Stone, the route by which Walker left the securities agency and landed the remunerative job at Deutsche Bank is redolent of the rotating door. In 2000, Darcy Flynn, one of Aguirre’s current clients, was on a securities-agency team of investigators looking into possible violations by Deutsche Bank. Its chief executive had told the press that Deutsche Bank was not interested in acquiring New York–based Bankers Trust. The bank’s stock plunged on the news; ergo, Deutsche Bank could buy it at a lower price. It eventually bought it. Investigators considered the case a slam dunk. Deutsche Bank took the usual course: it hired still another former securities-agency enforcement chief, Gary Lynch, to argue the institution’s case.

Suddenly, commission investigators got word that Walker, the agency’s head of enforcement, had recused himself from the case, and two weeks later the inquiry was jettisoned. It soon became obvious why: Walker was named general counsel of Deutsche. Wrote Taibbi, “Less than 10 weeks after the SEC shut down its investigation of the bank, the agency’s director of enforcement was handed a cushy, high-priced job at Deutsche.”

Then, in 2004, Walker hired a young federal prosecutor to become his protégé at Deutsche. His name: Robert Khuzami.

Well, it came to pass that on May 18 of this year, Khuzami, now himself head of enforcement at the securities commission, shot out a mass email to agency staffers saying he wanted examples of “lawyers behaving badly.” Actually, Khuzami wanted examples of outside lawyers misbehaving.

But Flynn thought Khuzami wanted examples of wayward attorneys inside the Securities and Exchange Commission. So Flynn sent him a decade-old example: the dumping of the Deutsche Bank investigation right before Walker departed as enforcement chief to become a lawyer for the big German bank.

“When Flynn sent his letter to Khuzami complaining about misbehavior by Walker, he was calling out Khuzami’s own mentor,” wrote Taibbi.

Flynn has gone on to become a nationally famous whistle-blower and still has a job at the agency, thanks in part to Aguirre. In July, Flynn told Congress that the Securities and Exchange Commission since 1993 has been destroying information on so-called “Matters Under Inquiry,” or preliminary look-sees into possible securities fraud. The agency earlier had worked out an arrangement with the National Archives and Records Administration that all records, including those related to preliminary investigations, should be maintained for 25 years. But the securities commission has ignored — possibly illegally — this agreement.

It has destroyed preliminary files on Ponzi schemer Bernie Madoff, the now-bankrupt Lehman Brothers, and beleaguered Goldman Sachs, among many miscreants.

That’s why Flynn, knowing the agency’s proclivity for getting revenge on whistle-blowers, hired Aguirre. Senator Chuck Grassley, senior Republican on the Senate Judiciary Committee, believes the Securities and Exchange Commission “might have sanctioned some level of case-related document destruction.”

Back in 2005, Aguirre worked for the securities commission and was fired after he wanted to pursue an insider trading case against a Wall Street hotshot. Grassley’s committee, and one other Senate committee, along with the agency’s inside investigator, sided with Aguirre in the matter. He got a generous settlement from the agency. And who do you think stabbed Aguirre in the back when he wanted to go after the hotshot? Mary Jo White, the ex–government prosecutor, now big-shot Wall Street lawyer, who will moderate the whistle-blowing seminar at the Del.

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Comments
22

Touché. Relatively clear account of a complicated matter. Thanks for bringing this out from under the rug.

Jan. 4, 2012

As I have repeated many times, the essence of white collar crime is contrived complexity. Lawyers are very skilled at taking a relatively simple scam, translating it into indecipherable legalese, and then claiming that their clients' intentions were fully disclosed. That's part of what is going on here. How many people in the public realize how scummy the relationship between securities swindlers and regulators actually is? Best, Don Bauder

Jan. 4, 2012

I wonder if Occupy San Diego might pay a visit to this cozy little gathering of lizards and snakes in suits...

Jan. 4, 2012

Hey, that's a great idea, Fred. Somebody might pass the word to the Occupy folks. Best, Don Bauder

Jan. 4, 2012

Not sure is occupy would be interested in a boring panel on how and why “whistle-blowers” are pro-regulation-anti-capitalist and bad for business growth.

Jan. 4, 2012

Good point, TC, but the Occupy folks oppose the mendacity that permeates Wall Street, and might be interested in this one. After all, the SEC's revolving door helps the big-time crooks and screws the little folks. Occupy folks are enraged about such Wall Street-government shenanigans. Actually, the Occupy talk is academic because the Hotel Del institute costs a bundle to attend. The Occupy folks would never get in the door. (On the other hand, being barred might be just what they are looking for.) Best, Don Bauder

Jan. 4, 2012

I'm ready to protest at the shyster securities lawyer convention. What we need is a list of the firms lawyering up. We might find tomorrow"s bankruptcies.

Jan. 4, 2012

I could name a bunch of firms whose lawyers are on the various panels. But I am not sure that's what you are looking for. If that's what you want, let me know and I will give you a list of some of the usual suspects. Best, Don Bader

Jan. 4, 2012

OWS turned the focus on the corporate puppet masters and away from the puppet circus of the debt ceiling debate. Moving bodies on the street obviously does more than our clicking keyboards and those of Reich or Krugman etc. i wouldn't presume to give any advice, but following their lead, we should aim at the crooks lawyers defend.

BREAK UP GOLDMAN SACHS.

Jan. 5, 2012

Actually, we should break up ALL the large financial institutions. No finanncial institution should be too large to fail. And after the breakup, they should not be permitted to have trading desks where MBAs gamble away behind computers all day. In short, we need a return to old-fashioned banking -- maybe even capping interest rates if we have to. Best, Don Bauder

Jan. 5, 2012

To big to fail, is to dangerous to allow.

If you or I were to steal a candy bar, we'd expect to spend a night or two in jail.

These scum have stolen billions, and they get appointed to lead the Treasury.

The sans culottes are gathering their pitchforks, and I hope they show up at the Del to give a little history lesson to the attendees of this conference.

http://en.wikipedia.org/wiki/Sans-culottes

Jan. 5, 2012

It is a very sad reflection on our society that the miscreants in the banking industry that almost led the world off the cliff by their gambling -- and then were rescued with trillions of public dollars -- got off free. Today has so many similarities with the Robber Baron era. The Robber Barons owned politicians at the federal, state, and local areas, just as Wall Street and corporations do today. But Teddy Roosevelt and other reformers were able to bust some trusts and shift public opinion. It can be done again. (I hope.) Best, Do Bauder

Jan. 5, 2012

At least the robber barons built something that was real...rail ways and oil refineries.

Today's robbers build NOTHING except debt that the rest of us have to pay off.

Time for pitchforks, torches, and guillotines already...

Jan. 15, 2012

The unimpeachable won't run for office, and the impeachable won't be run out of office. Flip that equation.

Jan. 15, 2012

I visited Occupy San Diego today, guitar in hand, and can report that idealism is alive and well. These protesters are amazingly well informed about banking and economics. For instance, when I mentioned that the Great Depression was ended only by the complete government economic takeover of WWII they nodded in agreement and added that the deficit far exceeded that of today.

I spent most of my visit folding up this very sophisticated comic book for distribution. http://www.missionminicomix.com/2011/11/what-ever-happened-to-glass-steagall/ I was very impressed overall. There's a demonstration planned for 430 Saturday at Children's Park downtown. These people are smart.

Jan. 5, 2012

Yes, the Occupy people, for the most part, are smart and well-informed. But the mainstream media around the country, including the New York Times, give them very little coverage. It's just one more example of how today is so similar to the Robber Baron era. Best, Don Bauder

Jan. 6, 2012

Being mere robber barons ain't good enough; the one percent want to be kings, fellow-travelers, and will share just enough of their plunder to have enough goon squads to keep the 99 percent down. The Corporate Feudal State.

"Never give up. Never, never, never give up!" --W. Churchill

Jan. 8, 2012

And today's robber barons have the Citizens United case to shield their identities and protect their mass bribing of politicians. The old Robber Barons didn't have that, although, like today's robber barons, they had judges galore in their pockets. Best, Don Bauder

Jan. 9, 2012

Speaking of judges in and of pockets, they’ve got us by the, mmmm,SCROTUS.

Jan. 15, 2012

SCROTUS: Magnificent line. Congratulations. I wish I had thought of it. The U.S. Supreme Court is owned by big business. Best, Don Bauder

Jan. 16, 2012

A guy named Jon Stewart is making a small fortune just repeating the hilarious stuff that floods the airwaves 24/7.

Jan. 16, 2012

Sounds like he is using other people's lines. Good life for a comedian. Best, Don Bauder

Jan. 16, 2012

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