News breaks this morning that President Obama will nominate Mary Jo White to be the next head of the SEC. Who is Ms. White?
A highly decorated attorney at the prestigious law firm of Debevoise & Plimpton. I would expect she might win a very easy approval to be our nation’s next top financial cop. Why so?
The spin on the nomination is that she is a former  prosecutor and US Attorney for the Southern District of New York and will hold Wall Street accountable. Is that right?
Before we coronate her, I think we may want her to address what I would deem to be a ‘skeleton in her closet’. Really? Oh yeah!!
Not that many in America might know but Ms. White is hardly unknown to those on Wall Street. In fact, in studying this skeleton it would appear that Ms. White has some close ‘friends’ — so to speak — on Wall Street including former Morgan Stanley CEO, John Mack.
Piqued your interest, yet? I would hope.
Regular readers are likely aware of the intrigue if not outright scandal surrounding the insider trading case of Pequot Holdings and the aforementioned Mr. Mack. In that case, then SEC attorney Gary Aguirre was pursuing justice in making the case that Pequot engaged in insider trading in which the then largest hedge fund in the industry made a tidy $14 million profit trading in Microsoft.
Where did Aguirre’s work lead him? To the door of one of Wall Street’s most powerful executives, prospective Morgan Stanley chief John Mack. What happened next?
In the course of reviewing The Firing of an SEC Attorney and The Investigation of Pequot Capital Management, we learn a lot about this case. An abridged United States Senate expose of events details that,

Attorneys for Pequot and Morgan Stanley had direct access to the Director and an Associate Director of the SEC’s Enforcement Division.
In January 2005, Pequot’s lead counsel met with the SEC Director of Enforcement Stephen Cutler. Shortly thereafter, SEC managers ordered the case to be narrowed considerably. In June 2005, Morgan Stanley’s Board of Directors hired former U.S. Attorney Mary Jo White to determine whether prospective CEO John Mack had any exposure in the Pequot investigation. White contacted Director of Enforcement Linda Thomsen directly, and other Morgan Stanley officials contacted Associate Director Paul Berger.
Soon afterward, SEC managers prohibited the staff from asking John Mack about his communications with Arthur Samberg at Pequot.

What did the 108 page report linked above highlight? From Mr. Aguirre’s own site we learn,

Senate Finance and Judiciary Committees conclude Mr. Aguirre’s allegations are true: senior SEC officials gave preferential treatment to Morgan Stanley’s CEO and then discharged Mr. Aguirre when he questioned their decision.  The two Committees recommend the SEC make major structural changes.

Perhaps before Ms. White is confirmed as the next head of the SEC somebody on Capitol Hill may want to call a special session. I think most people in America if not the world would care to learn all the details as to how and why Ms. White ran interference for Mr. Mack in this case. (By the way, Aguirre continued his work on this case after having been fired by the SEC and made the case that shut Pequot down and had that hedge fund pay a $28 million fine.)
Will Ms. White allow others to similarly intervene — as she did — on behalf of Wall Street’s power base?
Think of the insider trading that could have been prevented if Aguirre was not derailed in 2005.
Think of the investors in Microsoft who were not properly protected from the insider trading that Pequot undertook.
Think of the message that Ms. White’s intervention on behalf of Mack and Morgan Stanley sent to all those who were aware of this case at that point in time.
What does it mean now that our nation’s likely next top financial cop was willing to see an SEC attorney fired while doing his job. That SEC attorney was ultimately vindicated and then made the case that brought a degree of justice to this  situation.
America deserves to hear from Ms. White and have this skeleton brought fully out of the closet if we are to believe that real justice might ever have a chance to be meted out on Wall Street.
Thoughts, comments, constructive criticisms encouraged and appreciated.
Larry Doyle
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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.