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Report questions impartiality of SEC: NY Times
2008-10-07
WASHINGTON (Reuters) - A federal inquiry has concluded that the Securities and Exchange Commission should consider disciplining its director of enforcement and two supervisors for their role in handling an insider trading investigation, The New York Times said, citing an obtained report. The insider trading investigation led to the firing of a SEC lawyer for trying to interview an influential Wall Street executive, the newspaper said. The commission's inspector general, H. David Kotz, said in a 191-page report that he had found evidence that "raised serious questions about the impartiality and fairness" of the SEC's investigation of possible insider trading at Pequot Capital Management, according to the paper. Kotz also condemned what he called the "common practice" of giving outside lawyers' clients access to high-level SEC officials when they had complaints about front-line investigators, the paper said. SEC spokesman John Nester said the inspector general's report had confirmed the major findings of two previous inquiries into the matter and had cited evidence that the Division of Enforcement had a legitimate basis for terminating the attorney. "Of greater significance, the IG's report concluded that the Pequot matter at issue was 'aggressively pursued' and that 'the investigation did not find that Enforcement cases are generally affected by political decisions or the prominence of defendants,'" said Nester in an e-mailed statement. "The agency's administrative review process will now determine appropriate personnel actions," Nester said. The SEC's Office of Inspector General does not publicly release investigative reports, unlike its audits. The former SEC attorney, Gary Aguirre, has said he was fired after his inquiry got too close to a powerful Wall Street banker. Aguirre has said he wanted to subpoena John Mack, now the chief executive of Morgan Stanley (MS.N), as part of the probe, but was stopped by supervisors because of Mack's political clout. No enforcement action was taken in connection with the Pequot inquiry and Mack has denied any wrongdoing. Last year, the Senate Finance and Judiciary committees said the SEC's office of inspector general, then headed by Walter Stachnik, had failed to conduct a serious, credible investigation of Aguirre's claims. (Reporting by Tim Dobbyn in Washington, with additional reporting by Ajay Kamalakaran in Bangalore, editing by Gerald E. McCormick)
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