SEC officials today testified before the Senate Judiciary Committee that it was a lack of evidence that caused the agency to drop its investigation into hedge fund Pequot Capital Management's alleged trading on information provided by Morgan Stanley CEO John Mack. But committee Chairman Arlen Specter, R-Pa., made it clear he is not ready to let the Pequot issue go.
"At a minimum, it is very, very troubling what the SEC has done here," said Mr. Specter. "We're not finished with this, ladies and gentlemen."
The SEC investigation of Mr. Mack and Pequot originally was made public earlier this year when Gary Aguirre, a former SEC investigator, alleged his probe of the allegations was blocked by agency superiors because of the political clout of Mr. Mack, former Pequot chairman.
Linda Chatman Thomsen, director of the SEC's enforcement division, testified the insider-trading allegations were thoroughly investigated by the SEC and dropped because of a lack of evidence.
Also at today's hearing, Mr. Aguirre repeated allegations that he was fired from the SEC after complaining that his investigation was stopped "because of Mr. Mack's political power" — even though Mr. Aguirre had previously received a favorable employment review and a pay raise at the agency.
SEC officials denied that political influence played any role in the agency's Sept. 1 decision to fire Mr. Aguirre. Mark Kreitman, SEC assistant director, enforcement division, said Mr. Aguirre's behavior at the agency was unprofessional and erratic, and that Mr. Aguirre appeared to be pursuing a "personal agenda bordering on vendetta, instead of a calmly reasoned, fair-minded pursuit of the evidence."