SEC settles with Gary Aguirre over firing during Pequot Capital Management probe

Former enforcement lawyer Gary J. Aguirre accused the SEC of botching the Pequot probe.
Former enforcement lawyer Gary J. Aguirre accused the SEC of botching the Pequot probe. (Jay Mallin - Bloomberg News)
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By Zachary A. Goldfarb
Washington Post Staff Writer
Wednesday, June 30, 2010

First, they fired him.

Then, they worked to portray him as a "basket case."

Now, they're paying him $755,000 to settle his claims.

The agreement by the Securities and Exchange Commission on Tuesday to settle a wrongful-termination suit by former enforcement lawyer Gary J. Aguirre represents the culmination of years of bitter confrontation that raised questions about whether the agency was ignoring the toughest cases of alleged Wall Street wrongdoing.

Aguirre accused the agency of botching a probe into the prominent hedge fund Pequot Capital Management, saying the SEC was overlooking clear signs he uncovered that the firm traded in shares of Microsoft based on insider information. Aguirre also accused the agency of firing him after he pushed, unsuccessfully, to interview Morgan Stanley's then chief executive, John Mack, as part of the Pequot probe. Aguirre argued that the agency didn't want to interview the Wall Street giant because of his "political clout."

The agency fired Aguirre for insubordination and closed the case on Pequot.

But Aguirre's protests led to two internal investigations by the SEC's inspector general into the handling of the Pequot matter and a scathing Senate report that found that the agency bungled the probe and improperly fired Aguirre. Internal documents show the agency's efforts to discredit Aguirre included discussion of a "basket case" strategy that made him seem like a longtime agency gadfly. The former enforcement lawyer, meanwhile, pursued a private legal claim for wrongful termination.

Recently, the agency changed its tune on two counts.

After new evidence came to light in the Pequot case, the SEC opened a new probe and last month settled insider-trading charges with the firm. Pequot and its chief executive, Arthur Samberg, agreed to pay $28 million to settle SEC charges that the firm traded shares of Microsoft based on insider information.

And Tuesday, the SEC agreed to a settlement, finalized by the Merit Systems Protection Board, to pay Aguirre four years and 10 months of salary and attorney's fees in exchange for Aguirre dismissing his claims.

"I think it's fair to the public that the SEC pays for my work over the past four years and ten months, since it generated $28 million to the U.S. Treasury," Aguirre said. "But it's a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what Wall Street elite needed to hear at the perfect moment: The SEC goes after big fish, too."

SEC spokesman John Nester said, "The settlement resolves all outstanding litigation between the parties and reflects the agency's determination to focus on its core mission of protecting investors."

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