Gary Aguirre, a former SEC lawyer, was right, the agency was wrong, and he has had the last word. In 2005, Mr. Aguirre tried to get the agency to move on Pequot Capital Management for insider trading in Microsoft stock. The agency refused to “go after the big fish,†and Mr. Aguirre was suddenly a non-performer. He was  portrayed as a gadfly, a “basket case,†and then fired for insubordination. In May 2010, Arthur Samberg of Pequot, agreed to pay the SEC $28 million as a fine for the Microsoft  insider trading Mr. Aguirre had uncovered. That settlement came after new evidence emerged in Mr. Samberg’s divorce case. A case against a Microsoft employee for allegedly passing along the inside information to Mr. Samberg is pending. Mr. Samberg is alleged to have hired Microsoft employee David Zilkha who told Mr. Samberg before leaving Microsoft that the company would beat earnings expectations for the first quarter of 2001. The Samberg divorce case revealed an e-mail from Samberg to Zilkha that read, “I shouldn’t say this, but you have probably paid for yourself already.â€[1] Mr. Samberg made $18 million by buying Microsoft in advance of the earnings announcement.
How following Mr. Aguirre’s advice might have changed the financial markets. Mr. Aguirre was going after the big fish. John Mack of Morgan Stanley would have been interviewed. Just a little cage rattling might have humbled the markets a bit at that time. The failure to pursue the case also had a chilling effect on the agency. After Mr. Aguirre was fired, what SEC attorney or accountant was willing to go out on a limb on any of the cases that proved to be so harmful for so many, including Madoff and Stanford? Fear and silence, one of those 7 signs, was present in the SEC. Its presence means the same thing in a government agency that it means in a business: you won’t know what is really happening until it is too late.
Mr. Aguirre’s settlement of $755,000 consists of his salary since 2005 plus attorneys’ fees.
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[1] Kara Scannell, “Samberg’s Insider Pact, 7 Years After,†Wall Street Journal, May 28, 2010, p. C1.
Congratulations to Gary Aguirre; not only for a job well done, but also for the tenacity to stay the course.
But it is truly a sad state of affairs how biggest fish of all, the infamous John J Mack, escaped unscathed!
Mack got away with thievery and remains free as a bird; free to continue operating in the same slippery way he always has, and oddly and repulsively, he seems to continues to garner the highest respect Wall St can muster!
And what about the obviously-corrupted SEC management team – a phrase I use very loosely – that deliberately blocked Gary Aguirre’s investigative efforts 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 just such garbage; is it any wonder why the public now correctly perceives Wall Street as the sewerage system it is, and why investor confidence is at levels last seen in the 1930s?
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 $ 18 million plus that Pequot Capital Management made trading on insider knowledge of the GE Capital-Heller Financial merger; knowledge illegally provided by the untouchable 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
If the SEC wanted to demonstrate that it is serious about leaving behind its Madoff and Stanford inattention, its porn-surfing scandals, the swinging door from agency employees to private pratice and this ugliness over Pequot, it should hire Mr. Aguirre as a consultant to help leaders there understand when, where, why, and how the agency missed the boat so many times. Not only would his insights be helpful but his very presence would send the signal to all SEC employees that the winds have indeed shifted. There would be a graciousness in such a step that would increase leadership’s credibility and really move the agency from where it is — still struggling to find its way — to the position of respect it deserves.