Huge News. Kreitman and Hanson were accused by Specter of perjury at the Dec 06 Judiciary meeting.............BTW, John Mack should be finished on Wall St. with this.
http://www.nytimes.com/2008/10/07/business/07pequot.html?ref=business&pagewanted=print
October 7, 2008
Impartiality of S.E.C. Questioned
By WALT BOGDANICH
A federal inquiry has concluded that the Securities and Exchange Commission should consider disciplining its director of enforcement and two supervisors for their role in handling an insider trading investigation that led to the firing of an S.E.C. lawyer for trying to interview an influential Wall Street executive.
The commissionâs inspector general, H. David Kotz, said in a 191-page report obtained by The New York Times that he had found evidence that âraised serious questions about the impartiality and fairnessâ of the S.E.C.âs investigation of possible insider trading at Pequot Capital Management, a giant hedge fund.
Mr. Kotz also condemned what he called the âcommon practiceâ of giving outside lawyersâ clients access to high-level S.E.C. officials when they had complaints about front-line investigators.
By accusing S.E.C. supervisors of treating the Pequot investigation differently from other similar investigations Mr. Kotzâs report puts added pressure on an agency that has recently been accused of failing to aggressively regulate financial institutions at the heart of the subprime mortgage crisis.
The inspector generalâs report is the latest in a string of Congressional hearings and reports on the Pequot case. Those inquiries were begun after The Times, in June 2006, reported accusations by an S.E.C. lawyer, Gary J. Aguirre, that for political reasons his superiors at the agency had impeded his inquiry into possible insider trading at Pequot.
Mr. Aguirre complained that he was fired in September 2005, shortly after receiving a merit raise, because he wanted to take testimony from John J. Mack, currently the chief executive of Morgan Stanley and a close friend of Pequotâs founder, Arthur J. Samburg. Mr. Kotzâs investigation did not focus on whether insider trading occurred, but rather on Mr. Aguirreâs claims of preferential treatment and improper termination.
No enforcement actions were taken in connection with the Pequot investigation, which is now closed. Mr. Mack and Mr. Samberg have repeatedly denied any improper conduct
The inspector general primarily sided with Mr. Aguirreâs version of events, accusing enforcement officials of failing âin numerous respectsâ to properly manage him and for allowing âinappropriate reasons to factor into its decision to terminate him.â
As a result, Mr. Kotz recommended possible disciplinary action against the director of enforcement, Linda Thomsen; Mr. Aguirreâs direct supervisor, Robert Hanson; and the assistant director of enforcement, Mark Kreitman.
Ms. Thomsen was criticized for providing ârelevant informationâ about the commissionâs evidence against Mr. Mack to Morgan Stanleyâs counsel, Mary Jo White, a former United States attorney. At the time, Morgan Stanley was vetting Mr. Mack to be its new chief executive.
Ms. Thomsen, in describing e-mail messages, disclosed that there was âsmokeâ but âsurely not fire,â the inspector general said. He also noted that Mr. Aguirre knew much more about the investigation, but that Ms. Thomsen did not consult him before speaking to Ms. White.
Mr. Kotz said it was âfairly routineâ for outside lawyers to bypass front-line investigators and speak to S.E.C. supervisors when they had complaints about how their clients were being treated. This practice, Mr. Kotz said, would allow prominent lawyers to have better access to S.E.C. officials than less prominent ones.
In a statement Monday, the chairman of the Senate finance committee at the time, Charles E. Grassley, Republican of Iowa, who held hearings on the matter, said: âGary Aguirre told it like it was and lost his job. Today weâre all paying the price for an S.E.C. culture of deference to Wall Street.â
Ms. Thomsen, Mr. Hanson and Mr. Kreitman did not return messages left at their office seeking comment
John J. Nester, an S.E.C. spokesman, said Mr. Kotzâs report had concluded that the Pequot matter had been âaggressively pursuedâ and that âthe investigation did not find that enforcement cases are generally affected by political decisions or the prominence of defendants.â
Mr. Nester said the agencyâs review process would now determine âappropriate personnel actions.â
An earlier investigation of Mr. Aguirreâs charges by Walter J. Stachnik, Mr. Kotzâs predecessor, cleared the S.E.C. of any wrongdoing, but his report was sharply criticized by members of Congress when it was revealed that he had never interviewed Mr. Aguirre. Mr. Stachnik retired soon after.
Mr. Kotz said all of Mr. Aguirreâs supervisors had denied that his attempt to question Mr. Mack was behind his dismissal, but the inspector general found otherwise. âThere was a connection between the decision to terminate Aguirre and his seeking to take Mackâs testimony,â the report stated.
After members of Congress criticized the S.E.C., the commission eventually took Mr. Mackâs testimony â several days after the statute of limitations had passed. In taking that testimony, Mr. Kotz said the commission âseems to have âgone through the motions.â â
http://www.nytimes.com/2008/10/07/business/07pequot.html?ref=business&pagewanted=print
October 7, 2008
Impartiality of S.E.C. Questioned
By WALT BOGDANICH
A federal inquiry has concluded that the Securities and Exchange Commission should consider disciplining its director of enforcement and two supervisors for their role in handling an insider trading investigation that led to the firing of an S.E.C. lawyer for trying to interview an influential Wall Street executive.
The commissionâs inspector general, H. David Kotz, said in a 191-page report obtained by The New York Times that he had found evidence that âraised serious questions about the impartiality and fairnessâ of the S.E.C.âs investigation of possible insider trading at Pequot Capital Management, a giant hedge fund.
Mr. Kotz also condemned what he called the âcommon practiceâ of giving outside lawyersâ clients access to high-level S.E.C. officials when they had complaints about front-line investigators.
By accusing S.E.C. supervisors of treating the Pequot investigation differently from other similar investigations Mr. Kotzâs report puts added pressure on an agency that has recently been accused of failing to aggressively regulate financial institutions at the heart of the subprime mortgage crisis.
The inspector generalâs report is the latest in a string of Congressional hearings and reports on the Pequot case. Those inquiries were begun after The Times, in June 2006, reported accusations by an S.E.C. lawyer, Gary J. Aguirre, that for political reasons his superiors at the agency had impeded his inquiry into possible insider trading at Pequot.
Mr. Aguirre complained that he was fired in September 2005, shortly after receiving a merit raise, because he wanted to take testimony from John J. Mack, currently the chief executive of Morgan Stanley and a close friend of Pequotâs founder, Arthur J. Samburg. Mr. Kotzâs investigation did not focus on whether insider trading occurred, but rather on Mr. Aguirreâs claims of preferential treatment and improper termination.
No enforcement actions were taken in connection with the Pequot investigation, which is now closed. Mr. Mack and Mr. Samberg have repeatedly denied any improper conduct
The inspector general primarily sided with Mr. Aguirreâs version of events, accusing enforcement officials of failing âin numerous respectsâ to properly manage him and for allowing âinappropriate reasons to factor into its decision to terminate him.â
As a result, Mr. Kotz recommended possible disciplinary action against the director of enforcement, Linda Thomsen; Mr. Aguirreâs direct supervisor, Robert Hanson; and the assistant director of enforcement, Mark Kreitman.
Ms. Thomsen was criticized for providing ârelevant informationâ about the commissionâs evidence against Mr. Mack to Morgan Stanleyâs counsel, Mary Jo White, a former United States attorney. At the time, Morgan Stanley was vetting Mr. Mack to be its new chief executive.
Ms. Thomsen, in describing e-mail messages, disclosed that there was âsmokeâ but âsurely not fire,â the inspector general said. He also noted that Mr. Aguirre knew much more about the investigation, but that Ms. Thomsen did not consult him before speaking to Ms. White.
Mr. Kotz said it was âfairly routineâ for outside lawyers to bypass front-line investigators and speak to S.E.C. supervisors when they had complaints about how their clients were being treated. This practice, Mr. Kotz said, would allow prominent lawyers to have better access to S.E.C. officials than less prominent ones.
In a statement Monday, the chairman of the Senate finance committee at the time, Charles E. Grassley, Republican of Iowa, who held hearings on the matter, said: âGary Aguirre told it like it was and lost his job. Today weâre all paying the price for an S.E.C. culture of deference to Wall Street.â
Ms. Thomsen, Mr. Hanson and Mr. Kreitman did not return messages left at their office seeking comment
John J. Nester, an S.E.C. spokesman, said Mr. Kotzâs report had concluded that the Pequot matter had been âaggressively pursuedâ and that âthe investigation did not find that enforcement cases are generally affected by political decisions or the prominence of defendants.â
Mr. Nester said the agencyâs review process would now determine âappropriate personnel actions.â
An earlier investigation of Mr. Aguirreâs charges by Walter J. Stachnik, Mr. Kotzâs predecessor, cleared the S.E.C. of any wrongdoing, but his report was sharply criticized by members of Congress when it was revealed that he had never interviewed Mr. Aguirre. Mr. Stachnik retired soon after.
Mr. Kotz said all of Mr. Aguirreâs supervisors had denied that his attempt to question Mr. Mack was behind his dismissal, but the inspector general found otherwise. âThere was a connection between the decision to terminate Aguirre and his seeking to take Mackâs testimony,â the report stated.
After members of Congress criticized the S.E.C., the commission eventually took Mr. Mackâs testimony â several days after the statute of limitations had passed. In taking that testimony, Mr. Kotz said the commission âseems to have âgone through the motions.â â