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The Securities and Exchange Commission today (June 29) agreed to pay $755,000 to San Diego attorney Gary Aguirre. The sum represents four years and ten months of his salary since the agency fired him in 2005, plus his attorney fees. The story of the SEC's blatant prostitution in the Aguirre case has been told on this blog and in my column several times before, but it is worth summarizing. In short, Aguirre's ordeal is a story showing how the SEC, which was born in the 1930s to protect investors from Wall Street predators, became an agency that protected Wall Street predators from investors. Aguirre had good reason to believe that John Mack, head of Morgan Stanley, may have passed information to Pequot, then one of the most powerful hedge funds. But Aguirre's supervisors told him that Mack had "juice" and "political clout." Mack was a big fundraiser for George W. Bush. Prior to his pursuit of Mack and Pequot, Aguirre had been given a two-step pay raise for "consistently going the extra mile, and then some." But after Aguirre wanted to interview Mack, Aguirre's supervisors gave him a negative re-evaluation outside the SEC's ordinary performance appraisal process.

Two Senate committees studied Aguirre's ordeal and exonerated him, blasting the SEC for protecting Wall Street titans and whacking the agency's own employee. Then the SEC inspector general reported the same thing, and recommended that Aguirre's supervisors be disciplined.

While pursuing two lawsuits against the agency, Aguirre kept working on Pequot. In early 2009, Aguirre presented hard evidence of Pequot getting illegal tips in directing certain trades. In late May of this year, the agency filed charges against Pequot, which had already announced plans to shut down.

However, the Mack matter is closed, and the SEC has not disciplined Aguirre's then-superiors, as the inspector general recommended. Legal Director Tom Devine of the Washington DC Government Accountability Project says that the settlement with Aguirre may be the largest of its kind. "Unfortunately, this large settlement is the exception that proves the rule. Until Congress provides real protections for financial regulatory employees such as Aguirre, existing law will remain the best excuse for government regulators to turn a blind eye."

In short, the SEC has not yet taken down that red light that hangs above its door. The agency remains controlled by Wall Street lawyers and their clients who offer fat jobs to SEC lawyers, and in return get easy treatment for securities crooks.

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Comments

SparkySantos June 29, 2010 @ 10:40 a.m.

Hat's off to Gary Aguirre not only for a job well done, but also for the tenacity to stay the course.

But what about the biggest fish of all, the infamous John J Mack?!

Mack got away with thievery and remains free as a bird; free to continue operating the slippery way he always has!

And what about the obviously-corrupted management team - a phrase I use very loosely - that deliberately blocked Gary Aguirre at every pass? Why haven't these thugs been dealt with? This reeks of corruption and is clearly unacceptable!

With this sort of cover-up crap happening high up within the primary regulatory agency formed to supposedly prevent such garbage; is it any wonder why the public now correctly perceives Wall Street as the sewerage system it is?

Also, we should all be asking these important and relevant questions: Why is Gary Aguirre receiving only a paltry $ 755,000 when the SEC walked away with a cool $ 28 million that it never would have seen a dime of had it not been for his efforts? And, what about the $ 19 million or so that Pequot Capital Management made trading on insider knowledge of the GE Capital-Heller Financial merger; knowledge illegally provided by crooked tipper John J Mack?

Mary Shapiro, if after this mess you still do not believe it is necessary to CLEAN HOUSE, then in the opinion of this seasoned observer you should promptly step down!

With Much Deserved Disgust,

Sparky

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a2zresource June 29, 2010 @ 11:12 a.m.

Readers should be reminded of your previous comments regarding revolving-door employment between SEC and the firms it supposedly regulates, not to mention the political marriage that apparently insulated Bernie Madoff from scrutiny.

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Don Bauder June 29, 2010 @ 2:22 p.m.

Response to post #1: Every point you make is excellent. Aguirre, whom I tried unsuccessfully to reach for this item, really should have been paid more. And he is responsible for the SEC getting $28 million from Pequot only because Gary tenaciously stayed with the case. The SEC would have done everything in its power to look the other way at the evidence of illegal inside information that Pequot was gathering, but Aguirre persisted. And he had two Senate investigative bodies on his side, along with the SEC's own inspector general. The agency knew it had to do something. Cox is one of the most corrupt public officials the nation was stuck with during the Bush years. Schapiro is doing little to clean house. The SEC closed the Mack/Pequot case, but since it has reopened Pequot, it seems to me it should be able to reopen Mack. Best, Don Bauder

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Don Bauder June 29, 2010 @ 2:32 p.m.

Response to post #2: Yes, I have been on this crusade for several years. The Gary Aguirre case is the one I covered most closely, because Gary is a San Diegan. But I also covered the battle that Gary's brother Mike had with Cox. And yes, we covered San Diegans who lost in the Madoff Ponzi, which the SEC managed to miss (on purpose). The SEC also dropped the ball in its investigation of San Diego officials who kept important information out of bond documents. And, of course, the agency's handling of John Moores and Peregrine is classic. As the company was collapsing in scandal, Moores, who had bailed out of almost $500 million of stock while the books were being cooked, hired Chuck La Bella to quarterback a whitewash of the Peregrine board, including Moores. La Bella hired Latham & Watkins, which did the whitewash. The SEC lawyer handling the case said the Latham & Watkins study was a good one. Then he went with Latham & Watkins. When Moores's colleagues were being tried for criminal fraud (they had sold a tiny fraction of the stock he had), local judges wouldn't let the defendants' lawyers discuss how Moores had gotten off. Best, Don Bauder

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SurfPuppy619 June 30, 2010 @ 2:11 p.m.

The news made it to the top legal blog;

  • The SEC pays out $755K to fired lawyer Gary Aguirre, who claimed wrongful termination after he tried to investigate a prominent hedge fund. [Associated Press]

http://abovethelaw.com/page/2/">http://abovethelaw.com/page/2/

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Don Bauder June 30, 2010 @ 5:47 p.m.

Response to post #5: Securities lawyers should demand to know why Gary Aguirre's supervisors who squashed the case against Mack and fired Aguirre have not been disciplined, as the SEC's internal investigator strongly suggested. And why is Mack in the clear? There is a lot more to this case, as I have reported earlier. Put Gary Aguirre's name in the search box here and you will come up with past articles and blog posts. The whole thing smells to high heaven. Best, Don Bauder

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