In July 2004, SEC investigator Gary J. Aguirre became lead investigator of unusual trading by Pequot Capital Management. Pequot had earned about $18 million in one month from heavy purchases of Heller Financial stock before its acquisition by GE Capital. Aguirre concluded that hedge-fund chief executive Arthur Samberg’s trades lacked ordinary research or documentation and sought to subpoena John J. Mack, a prominent Wall Street executive who had spoken with Samberg and was then being considered as Morgan Stanley’s CEO. According to a later Senate investigation, supervisors warned Aguirre that Mack had significant political connections, including ties to major Republican donor networks.
After Aguirre objected to what he viewed as preferential treatment, the SEC ordered an unusual supplemental evaluation and fired him without warning on September 1, 2005. A joint Senate report released August 3, 2007, reviewed roughly 10,000 pages and more than 30 interviews, finding that Mack received preferential treatment and that Aguirre’s termination was unlawful retaliation. A federal court later compelled the SEC to release withheld records, citing the Senate findings. The agency reopened the Pequot investigation after Aguirre supplied evidence, and on May 27, 2010, charged Pequot, Samberg, and executive David Zilkha; Pequot settled for $28 million. In June 2010, the SEC settled Aguirre’s wrongful-termination claim for $5,000. Mary Jo White denied asking the SEC to close the investigation, leaving aspects of the alleged intervention disputed, but the retaliation finding and enforcement aftermath were formally documented.
