During the bush ii years, major bush fundraiser, John Mack, CEO and Chairman of banking behemoth, Morgan Stanley appeared to get away with inside trading while engaging in an incestuous daisy chain of musical jobs and greasy palms at the SEC. That's not to say everyone at the SEC was corrupt or inept. Gary Aguirre of the SEC's enforcement unit, was hot on Mack's trail, until he was fired for not playing ball well with others. Of course that was just days after Aguirre received a two-stepmerit-based pay raise."
In 2001, Pequot Capital, began investing heavily in Heller and shorting GE. Mack's company, Morgan Stanley, was an adviser on the deal. Both investments paid off sweetly for Pequot who at the same time, allowed John Mack to be the only individual investor in a side investment that paid Mack off at 300% of his investment.
So - a little background on John Mack's career path
05/97-01/01 President and COO of Morgan Stanley
07/01-06/04 President, CEO of Credit Suisse First Boston
06/04-06/05 Chairman of Pequot Capital Management (now defunct) Adam Samberg was the CEO
06/05-present CEO and Chairman of Morgan Stanley
The documents say that Pequot became the nation’s biggest purchaser of Heller stock in the four weeks before the company was acquired by GE Capital in July 2001. Mr. Samberg bet $44 million on Heller and wanted to invest even more, according to the documents, but his trader could not fill all the orders...
What intrigued federal investigators, Mr. Aguirre said, was that before buying Heller stock, Mr. Samberg apparently did not follow the financial services industry or Heller. Mr. Samberg’s bet had paid off: On July 30, 2001, the GE Capital Corporation announced that it was buying Heller, sending Heller’s stock up 50 percent. Pequot made $18 million on the deal, primarily by investing in Heller, but also by short-selling GE Capital’s parent, General Electric, which dropped on news of the buyout.
So, Pequot seems to have got an inside tip from someone. I wonder who...?
The Senate report suggested that the S.E.C. had failed to pursue the Pequot investigation vigorously after Mr. Aguirre’s firing. For instance, when the commission took Mr. Mack’s testimony on Aug. 1, 2006, the report said, it did not "seriously test" a theory put forward by Mr. Aguirre that Mr. Samberg had rewarded Mr. Mack for information on the Heller deal by letting him invest alongside Pequot in a private company that was sold for three times his investment in little over a year.
Mr. Mack was the only individual investor allowed to participate in the deal, the report noted. The next trading day after Pequot officials allowed Mr. Mack in the deal, Mr. Samberg began his aggressive buying of Heller Financial stock.
But after Mr. Aguirre’s investigation was under way, the report said, lawyers for both Mr. Samberg and Morgan Stanley’s board, which was then considering hiring Mr. Mack as chief executive, received access to high-level S.E.C. enforcement officials — outside the presence of Mr. Aguirre, who was leading the Pequot inquiry. After these contacts, the scope of the Pequot investigation narrowed and Mr. Aguirre was barred from interviewing Mr. Mack.
When Mr. Aguirre complained, the S.E.C. retaliated by firing him, Senate investigators concluded.
Now as unique and rare as this particular opportunity for the SEC to crackdown on a major Wall Street player hiding in plain sight was...Bernie Madoff...
The SEC does not let people just slip away because of financial or political connections. If there's smoke, they find the fire. They root it out until the last embers turned.
For example, on June 26, 2005, Linda Thomsen, the (SEC)director of enforcement, spoke by telephone about the Pequot case to Mary Jo White, a lawyer at Debevoise & Plimpton, who was representing the Morgan Stanley board and was concerned about Mr. Mack’s possible involvement, the report said.
Ms. Thomsen said she had told Ms. White nothing about the case during the call. But according to Ms. White’s account of that conversation, Ms. Thomsen disclosed that subpoenaed e-mail messages showed that there was "smoke there" though "surely not fire."
"Surely, not"....
Mary Jo White's firm, who represented Morgan Stanley, later hired Aguirre's boss at the SEC.
Aguirre in histestimony today questions whether his former SEC supervisor, Paul Berger, was rewarded for the agency's ``apparent favor'' to Mack and Morgan Stanley with a job at New York-based law firm Debevoise & Plimpton LLP, where Mary Jo White, a former prosecutor who represented Morgan Stanley, is a partner. Berger joined Debevoise & Plimpton in June.
``This is a complete fabrication,'' Berger said...
No, Mr Berger it's not.
The report also concluded that Paul R. Berger, then an associate director of enforcement and one of Mr. Aguirre’s supervisors, did not recuse himself from the Pequot case "in a timely manner" once he had expressed interest in working for Debevoise,...
Mr. Berger, ...took a job at Debevoise, initially told Senate investigators that he had stopped working on any matters involving Debevoise in early 2006, around the time he first considered seeking employment at the firm. But Senate investigators said they had found that the previous September, just days after Mr. Aguirre’s firing, Mr. Berger authorized an S.E.C. colleague to tell Debevoise that he might be interested in working there.
"Mary Jo just called," the colleague wrote to Mr. Berger, referring to Ms. White in an e-mail message dated Sept. 8, 2005. "I mentioned your interest."
So Berger was interested in working at the firm in 2005 not 2006. Liar, liar.
Just throwing crap out there. It's good crap, but I don't have time to form it right now.