New IG sides with Aguirre

It has been a year and a half since I mentioned Gary Aguirre in this blog.

It's time for an update.

The Inspector General of the Securities and Exchange Commission has put out a 191 page report on the controversy that arose in 2005, when supervisors fired Aguirre while (and allegedly because) he was pursuing insider-trading charges involving the hedge fund Pequot Capital Management, and GE's plans to acquire Heller Financial.

The New York Times ran a story on his termination in June 2006, making the matter a political hot potato.

By December 2006, at a Senate Judiciary Committee hearing, some of those supervisors offered their own accounts of wht Aguirre was actually fired. Of course, they didn't say, "We were trying to protect our buddy John Mack, formerly of Pequot, from this whipper snapper."

What they said was perhaps put best by Mark Kreitman, the assistant director of enforcement at the SEC. Kreitman testified that when Aguirre began working under Kreitman at the SEC, "I refused his request for special treatment to be allowed to report outside the chain of command directly to me."

Kreitman further: Aguirre came to believe "primarily on the basis of speculation, that Mr. Mack was the tipper in Pequot's trading prior to announcement of GE's acquisition of Heller Financial, and repeatedly and heatedly insisted that we subpoena John Mack for testimony immediately, before he had developed evidence that Mr. Mack had access to material nonpublic information, or indeed any potentially inculpatory evidence with which to confront Mr. Mack."

The contention, then, is that Aguirre may have been rather too full of himself even at the start of his employment there, and may have overstretched in terms of his own speculations.

Nonetheless, in August 2007 the two relevant Senate Committees, Judiciary and Finance, but out a joint report on the matter, sympathetic to Aguirre and critical of the then-Inspector General of the SEC for failing to pursue the issue of the true reason for his termination. The IG at that time, Walter Atchnik, "retired" from his office, simultaneous with the release of the Senate report.

So this new report is obviously the product of another IG, H. David Kotz. Excerpts have been quoted in a lot of publications but I don't believe the whole 191 pages is publicly available yet.

Here's a link to the account in The New York Times.

Kotz, like the Senate committees, finds Aguirre's version of events credible. He doesn't focus on the underlying insider-trading case, which is now closed (and all involved have denied wrongdoing, BTW) but he does conclude that Aguirre's supervisors, including Kreitman, allowed "inappropriate reasons" to factor into their decision to fire Aguirre.

I'll have some further observations on the whole mess in tomorrow's entry.