Last year, the Securities and Exchange Commission (SEC) began investigating one of the nation's largest hedge funds, Pequot Capitol Management, for possible insider trading. Up until last summer, the inquiry was headed by SEC lawyer Gary Aguirre.
His investigation proceeded smoothly, Aguirre claims, until he asked for testimony from former Pequot chairman and Morgan Stanley CEO, John Mack, a top Bush donor whom Aguirre's supervisor said had "powerful political connections."
Bush accepted more money from Wall Street than any other industry for his re-election campaign and Mack was one of nine Wall Street "Rangers" who raised $200,000 for W.
Aguirre's supervisors blocked Mack's testimony and fired Aguirre on September 1, only 11 days after he received a pay increase and was praised by his boss.
"His efforts have uncovered evidence of potential insider trading and possible manipulative trading by the fund," wrote his supervisor, Robert Hanson. "He has consistently gone the extra mile, and then some."
Pequet purchased $44 million of stock in a company, Heller Financial, a day before it was bought out by General Electric. The day of the buyout's announcement, Heller's stock price jumped 50 percent. Aguirre suspected Mack tipped Pequet off.
After supervisors blocked Aguirre from questioning Mack, he sent 30 complaints to SEC higher-ups, including SEC Chairman Chris Cox.
"I am compelled to write to you today, my last day with the Commission, out of a sense of duty to the Commission's mission--to maintain the integrity of financial markets and to protect the investor," Aguirre wrote to Cox. "Unfortunately, my supervisors--as far up the chain as I can see--have lost sight of that mission in the above manner."
Upon his dismissal, Aguirre described his allegations in an 18-page letter sent to Senators Chuck Hagel and Chris Dodd and the chairman of the Senate Banking and Finance Committees.
"Aguirre wrote to Hagel and Dodd that the SEC halted the investigation only a short while after having said that the evidence should be presented to federal prosecutors for a possible criminal investigation," Reuters reported.
"Those details are definitely disconcerting," former SEC Chairman Harvey Pitt told CNBC. "The SEC and the inspector general will want to look into that. There's no question that these developments are troubling."
Aguirre testified on Capitol Hill this morning. Both the Senate Banking and Finance Committees have asked the SEC to launch an internal investigation. As Aguirre writes in his letter, "It is not surprising that the US Office of Management and Budget gave SEC enforcement its lowest performance assessment: 'Results Not Demonstrated.'"