According to Gary Aguirre, the SEC Whistleblower, “when you’re talking to people and asking them to change their culture, you might as well be talking to a piece of granite and asking it to transform itself into a piece of sculpture.”
Aguirre spoke recently at the Institute for Excellence in Corporate Governance at the University of Texas at Dallas, where I teach. We compared notes about the parallels between his “five year war” against the SEC and mine. And the toxic environment we were both in.
According to Aguirre, and I concur, the SEC which is supposed to have control over financial institutions has instead been captured by the very ones they are supposed to be regulating. They are very lenient on those they are supposed to control and the banks have a stranglehold on Congress as well as the regulatory agencies. We agreed the situation is out of control.
Gary, an attorney was practicing in San Diego. In 2000 he went back to law school and after earning his second law degree applied for and received a public service job with the SEC, where he became the lead investigator on an insider trading case involving Pequot Capital Management. While he saw continued abuses, there had not been a case against insider trading in 25 years!
Aguirre went after this case and thought there was a good chance of getting a conviction. Suspecting the leaked information came from John J. Mack, a Wall Street titan and major contributor to the 2004 campaign of President George W. Bush, Aguirre wanted to subpoena Mack, but supervisors told him Mack had too much “political clout” and the case would not be pursued. The case was postponed.
Aguirre complained to a superior about the preferential treatment being given Mack and was fired without warning. A Senate investigation later found his termination to have been an illegal reprisal.
In May 2010, Pequot Capital settled its insider trading charges with the SEC for $28 million and a month later, the SEC settled the wrongful termination suit filed by Aguirre for $755,000. Aguirre returned to private practice in San Diego in 2008, specializing in securities law. He has emerged as a major critic of the SEC, calling it an agency that was set up to protect the public from Wall Street, but now protects Wall Street from the public.
In 1934, when FDR signed the SEC Act, FDR asked what kind of law this will be? Legend has it that he was told, “It will be a good bill or bad, Mr. President, depending on the men who administer it.” It turns out it is no law at all.
[tweetthis twitter_handles=”@RichardMBowen”]The inmates (SEC) are running the institution.[/tweetthis]
According to Aguirre, the media describes the SEC as Wall Street’s Cop, but the truth is, “the SEC roars like a lion and bites like a flea” – a quote he attributed to Harry Markopolous, a financial fraud investigator who blew the whistle on Bernie Madoff’s ponzi scheme.
On that he is spot on. The inmates are running the institution.
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
