SEC Wants Mack
Liz Moyer, 07.21.06, 1:10 PM ET
Morgan Stanley Chief Executive John Mack will testify to the U.S. Securities and Exchange Commission in answer to allegations made by a former SEC investigator that he tipped off hedge fund Pequot Capital about a 2001 merger deal.
The SEC contacted Mack Thursday and asked for the interview, and a spokesman said Mack agreed. "He welcomes the opportunity to put to rest any issues surrounding this matter," the Morgan Stanley (nyse: MS - news - people ) spokesman said in a statement Friday. No timetable has been set for the meeting, but the spokesman indicated it could come in a matter of days.
His agreement to the interview comes as SEC Chairman Christopher Cox prepares to sit before the Senate Banking Committee next week, in a hearing during which he will undoubtedly be asked about the agency's handling of the allegations, which were made last year by Gary Aguirre, a former SEC investigator who was probing Pequot Capital for possible insider trading.
Aguirre claims he was unceremoniously fired from the SEC last year because he was aggressively pursuing the investigation and wanted to interview Mack about his findings. Aguirre claims his efforts to talk to the politically well-connected Mack were blocked by senior SEC officials.
In a Senate Judiciary Committee hearing last month, Aguirre testified that he had uncovered evidence that Mack had tipped off his friend and Pequot chief Art Samberg to a July 2001 merger deal between GE Capital and Heller Financial. Pequot had amassed a short position in General Electric (nyse: GE - news - people ) shares in the weeks before that deal and a long position in Heller, and the $7 billion hedge fund pocketed some $18 million in profit once the deal was announced.
Pequot has denied any wrongdoing.
GE Capital had been advised by Morgan Stanley in that $5 billion deal, which was announced July 30, 2001, and Heller was advised by Credit Suisse First Boston and Lehman. Mack had been president and chief operating officer of Morgan Stanley that year, but quit in March. He became chief executive of Credit Suisse in July 2001.
Mack left Credit Suisse in June 2004 and worked for a couple of weeks as chairman of Pequot Capital in June 2005. But at the end of that month, he was hired by Morgan Stanley to take over the chief executive spot that had been vacated by Philip Purcell.
Morgan Stanley's board had been made aware of Aguirre's probe of Mack and Pequot and hired former U.S. Attorney Mary Jo White to investigate the matter before it hired Mack to be CEO.
Aguirre brought his allegations about insider trading and his complaints about being fired from the SEC to the attention of Capitol Hill in a letter last month. Several lawmakers said they are looking into how the SEC handled the matter. Sen. Arlen Specter, R-Pa., the chairman of the Senate Judiciary Committee, said at the hearing last month that he would also look into the matter and asked Aguirre to forward him copies of the e-mails that Aguirre claims document his investigation and firing. |
