Senators Bring Pequot-Aguirre Matter to the Floor
By Christopher Faille, Senior Financial Correspondent | Thursday,
February 01, 2007
WASHINGTON (HedgeWorld.com)-The controversy over the Securities and Exchange
Commission's one-time investigator Gary Aguirre and the events that led to
the termination of his employment there in 2005 reached a new stage
Wednesday [Jan. 31]. Discussion of it moved out of committee hearing rooms
onto the floor of the United States Senate.
Sen. Charles Grassley (R-Iowa) took the floor to "update the Senate on the
interim Finance Committee findings of the joint investigation into the [SEC]
that was conducted by the Finance Committee on the one hand, and the
Judiciary Committee on the other, during the 109th Congress."
Mr. Grassley, who was the chairman of the Senate Finance Committee in the
last Congress, said that he and Sen. Arlen Specter (R-Pa.), last year's
chairman of the Judiciary Committee, have three main concerns: that the
SEC's investigation into suspected insider trading by Pequot Capital
Management was "plagued with problems from its beginning to its abrupt
conclusion," that Mr. Aguirre's termination was "highly suspect," and that
the investigation by the SEC's Office of Inspector General was flawed.
"The SEC should have taken Mr. Aguirre's allegations more seriously and very
seriously," Mr. Grassley said. "Instead, it does like too many agencies do
when under fire-it circled the wagons and it shot a whistleblower-an all too
familiar practice in Washington, D.C."
After those remarks, Mr. Grassley yielded the floor to Mr. Specter, who was
if anything more emphatic than his colleague, especially at the expense of
the SEC's Inspector General, Walter Stachnik. He was especially concerned
that Mr. Stachnik, in his effort to obtain the records of Mr. Aguirre's
contact with the committees, may have chilled whistleblowing.
"It is hard to find a strong enough word which is not insensitive to
describe the inspector general's conduct in trying to subpoena the records
of the Senate Judiciary Committee and the Senate Finance Committee," said
Mr. Specter. "It just made absolutely no sense."
The Pequot trades that Mr. Aguirre was investigating in 2005 involved the
purchase of Heller Financial stock and the short-selling of General Electric
stock in July 2001. At the end of that month, GE announced its plan to
purchase Heller for about $5.3 billion in cash.
Inside information wasn't, of course, the only possible reason for some risk
arbitrage on GE/Heller in July 2001. Such a deal had been the subject of
speculation for months, and the possibility had shown up in the pages of the
Wall Street Journal.
Nonetheless, the two senators said in a joint statement entered into the
record on Wednesday that in January 2002 the New York Stock Exchange
highlighted the Pequot trades as warranting further scrutiny. "But it
appears that the SEC did next to nothing to investigate these trades until
after [Mr.] Aguirre joined the Commission over two years later on Sept. 7,
2004."
The SEC, through a spokesman, said that it would carefully consider the
findings and recommendations of the two Senate committees. Nobody was
answering the phone at the SEC's Office of Inspector General early Thursday
afternoon.
Pequot has denied any wrongdoing, as have Mr. Aguirre's superiors at the SEC
Previous HedgeWorld Story.
CFaille@HedgeWorld.com
