We all pay for SEC deference to Wall St.

Discussion in 'Wall St. News' started by flytiger, Oct 7, 2008.

  1. 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.


    October 7, 2008

    Impartiality of S.E.C. Questioned


    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 commission’s inspector general, H. David Kotz, said in a 191-page report obtained by The New York Times that he had found evidence that “raised serious questions about the impartiality and fairness” of the S.E.C.’s investigation of possible insider trading at Pequot Capital Management, a giant hedge fund.

    Mr. Kotz also condemned what he called the “common practice” of giving outside lawyers’ 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. Kotz’s 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 general’s 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 Pequot’s founder, Arthur J. Samburg. Mr. Kotz’s investigation did not focus on whether insider trading occurred, but rather on Mr. Aguirre’s 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. Aguirre’s version of events, accusing enforcement officials of failing “in numerous respects” to properly manage him and for allowing “inappropriate reasons to factor into its decision to terminate him.”

    As a result, Mr. Kotz recommended possible disciplinary action against the director of enforcement, Linda Thomsen; Mr. Aguirre’s direct supervisor, Robert Hanson; and the assistant director of enforcement, Mark Kreitman.

    Ms. Thomsen was criticized for providing “relevant information” about the commission’s evidence against Mr. Mack to Morgan Stanley’s 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 “smoke” but “surely not fire,” 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 “fairly routine” 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: “Gary Aguirre told it like it was and lost his job. Today we’re all paying the price for an S.E.C. culture of deference to Wall Street.”

    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. Kotz’s report had concluded that the Pequot matter had been “aggressively pursued” and that “the investigation did not find that enforcement cases are generally affected by political decisions or the prominence of defendants.”

    Mr. Nester said the agency’s review process would now determine “appropriate personnel actions.”
    An earlier investigation of Mr. Aguirre’s charges by Walter J. Stachnik, Mr. Kotz’s 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. Aguirre’s supervisors had denied that his attempt to question Mr. Mack was behind his dismissal, but the inspector general found otherwise. “There was a connection between the decision to terminate Aguirre and his seeking to take Mack’s testimony,” the report stated.

    After members of Congress criticized the S.E.C., the commission eventually took Mr. Mack’s testimony — several days after the statute of limitations had passed. In taking that testimony, Mr. Kotz said the commission “seems to have ‘gone through the motions.’ ”
  2. Date: Friday, October 10, 2008 8:42:26 PM [View Source]

    Source: http://www.reuters.com/article/governmentFilingsNews/idUSN1040864720081010?sp=true
    Inspector general faults U.S. SEC enforcers again
    Fri Oct 10, 2008 7:21pm EDT
    By Rachelle Younglai
    WASHINGTON, Oct 10 (Reuters) - An enforcement director with the U.S. Securities and Exchange Commission failed to vigorously enforce securities laws in a 2003 investigation into Bear Stearns' pricing of collateralized debt obligations, the agency's internal watchdog said on Friday.
    The SEC's inspector general found that there were delays in the investigation, the potential appearance of favorable treatment and lack of coordination with a federal prosecutor.
    The 2003 probe centered on whether a salesperson at Bear Stearns provided inaccurate pricing for collateralized debt obligations (CDO) to Puerto Rico-based financial holding firm W. Holding. However, after reviewing data from Bear Stearns, the SEC concluded the case was "inappropriate for further enforcement action" and closed it in 2007.
    The recent demise of Bear Stearns raised questions about whether the SEC closed the case prematurely, and in April Sen. Charles Grassley asked the SEC inspector general to investigate the matter. Grassley is the top Republican on the Senate Finance Committee.
    The new inspector general's report singled out SEC regional director David Nelson, saying he "failed to administer his statutory obligations and responsibilities to vigorously enforce compliance with securities laws in connection" with the case.
    The matter is being referred to SEC Chairman Christopher Cox for disciplinary action, the report said.
    The SEC said in a letter accompanying the report that it disagreed with the findings, which it said were misleading and often relied on speculation to support its harsh conclusions.
    The findings are the latest in a series of inspector general reports criticizing SEC actions.
    On Tuesday, the internal watchdog said the SEC should discipline its director of enforcement and two supervisors for their role in an insider trading probe. Late in September, the inspector general said the SEC failed to adequately supervise Bear Stearns and limit the amount of risk it took on.
    "The Inspector General's findings offer yet another disturbing example of the lack of vigorous enforcement at the SEC," Grassley said in a statement.
    "While it is not clear whether more aggressive action in this case could have helped the SEC identify systemic risks at Bear Stearns much earlier, it certainly demonstrates the culture of deference at the SEC in dealing with the big players on Wall Street." (Reporting by Rachelle Younglai; editing by Carol Bishopric, Richard Chang)

    © Thomson Reuters 2008 All rights reserved
  3. AK100


    No surprise, SEC, Washington, pretty much anyone with influence had been bought.

    They'll tighten up for sure but give it 10-15 years and it will be back to normal again.

    Money = power basically.
  4. "While it is not clear whether more aggressive action in this case could have helped the SEC identify systemic risks at Bear Stearns much earlier, it certainly demonstrates the culture of deference at the SEC in dealing with the big players on Wall Street."

    Two thoughts.

    1) They don't pay me enough to do this.

    2) I wouldn't be here if I could correctly indentify pricing of CDO's.