Gary J. Aguirre

Gary J. Aguirre is an American lawyer, former investigator with the United States Securities and Exchange Commission (SEC) and whistleblower.

After working in a law firm briefly, he became a public defender, then worked as a trial lawyer in California. Having reached his professional and financial goals, he took an extended break in 1995. In 2000, he decided to go into public service and went back to law school, focusing on international and securities law.

After earning his second law degree, he applied for a job with the SEC, where he became the lead investigator on an insider trading case involving Pequot Capital Management. 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 would not be pursued. Aguirre complained to a superior about the preferential treatment being given to 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 $5,000. 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. He represents Darcy Flynn, also an SEC whistleblower, who in summer 2011 was interviewed by staff from three congressional committees. He said that the SEC had destroyed thousands of records of preliminary investigations and that SEC investigators trying to pursue a case against Deutsche Bank were thwarted by Richard H. Walker, then SEC director of enforcement, who shortly thereafter, took a job at Deutsche Bank as general counsel. He also represents Rodolfo Michelon, a whistleblower, a former comptroller at Sempra Global, who claims Sempra paid kickbacks to Mexican government officials and has filed a suit against the SEC alleging the SEC "outsourced" its investigation of Sempra to a law firm with ties to Sempra, in effect subverting the law.

Enters private practice Aguirre is a lawyer in San Diego, California. He was admitted to the State Bar of California on December 23, 1966. He became an associate at Brobeck, Phleger & Harrison, then one of San Francisco's largest firms. In his spare time, worked on Robert F. Kennedy's presidential campaign. On May 28, 1968, Kennedy sent him a letter that spoke of the special role lawyers played in bringing about orderly change to the nation. Just eight days after sending the letter, Kennedy was assassinated. for a mid-air plane crash over San Diego in 1978, then the worst aviation disaster in U.S. airspace. In the 1980s, Aguirre pioneered construction-defect litigation, a branch of class-action law previously considered by San Diego lawyers to be too difficult for plaintiffs to win.

Arguing on behalf of homeowners in construction-defect cases, by 1994, Aguirre and his partner had won 94 consecutive cases, recovering over $200 million for the plaintiffs. sold a stucco-like product for use on exterior walls. Within a short time, the product was found to be defective and deteriorate rapidly, causing significant damage to homes and buildings. Manville pulled the product off the market in 1974, just four years after it was introduced. The board of directors and officers remained in the same positions, so nothing essential changed; except the assets were diverted. and when he went to trial, he accurately predicted the company would file between 45 and 60 days. The amount was later increased to $7.5 million when delay damages were added. On July 2, 1982, the day after winning his lawsuit against Manville, Aguirre went back to court to ask that Manville be required to post a $9 million bond to guarantee his clients' judgment in case of a bankruptcy filing, arguing that Manville was on the verge of filing a Chapter 11 bankruptcy. Agreeing with Aguirre's argument, the judge ordered Manville to post a bond.

Eight weeks later, on August 26, 1982, Manville did file for Chapter 11 protection from multiple damage awards, The thousands of other lawsuits remained frozen

SEC investigator, becomes whistleblower In July 2004, Aguirre entered public service as a senior counsel at the SEC Division of Enforcement in Washington, D.C. A routine check of Wall Street trades flagged unusually heavy stock purchases by Pequot Capital Management, a hedge fund, in Heller Financial in July 2001, which was bought by GE Capital shortly thereafter, earning Pequot $18 million inside of a month. Aguirre was made the lead investigator on the case.

First of all, the profit on it was $18 million in one month and it was handled solely by the CEO of the hedge fund [Arthur Samberg] without collaboration by anybody else. In fact, their internal regulations about how you were supposed to make these kinds of decisions—talk to other people, visit the company—none of these things was done. There were no e-mails, there were no reports, there was no research, no contact with any companies, no contact with third parties. There was just nothing. One day this guy [Samberg] just says, 'Heller Financial!'

As it says in the Senate report, Samberg's orders were sometimes for twice as much stock as sold on that day. So if you're selling 200,000 shares that day, he wanted to buy 400,000. Well, how come you're buying all of this if you've never done any research, you haven't talked to these guys, you don't follow the stock? There was no rational explanation why this guy bought more stock than anybody else in the country during these 30 days. So then we began to backtrack—who did he talk to immediately before he bought it that could've known anything about this stock? Well, of course, there was only one person, and that was John Mack.|source=Gary J. Aguirre, San Diego Magazine and had been a major contributor to the 2004 presidential campaign of George W. Bush. Initially, Aguirre had the full support of other SEC staff and of his supervisors. This changed on June 23, 2005, when Aguirre received a phone call from Eric Dinallo, head of regulatory compliance at Morgan Stanley, who wanted to know if the SEC was "going to proceed against Mack" because of concerns revolving around Morgan Stanley's decision to hire Mack as CEO. The same day, Aguirre's supervisor, Robert Hanson, told him it would be an uphill battle to pursue Mack because of Mack's "powerful political connections".

Investigation derailed Just three days after the call to Aguirre, Mary Jo White placed a call to Linda Chatman Thomsen. White is a partner at Debevoise & Plimpton, the law firm hired by Morgan Stanley to vet Mack and was in charge of the process which has jurisdiction over Wall Street. Though Thomsen told the Senate she told White she couldn't say anything about the Mack investigation, the Senate report said White's talking points indicated Thomsen had said there was "smoke" but "surely not fire".

A month later, on July 27, 2005, Aguirre sent an e-mail to his supervisor Paul R. Berger, which is "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." In this e-mail, Aguirre also reported to Berger that Hanson had said Mack had "political connections".

Retaliation After Aguirre raised concerns about the special treatment being given Mack, Berger told Hanson to do a "supplemental evaluation" of Aguirre and one other staff attorney "looking to raise trouble". Aguirre continued to have conversations with Hanson about Mack in the early days of August. Hanson continued to refer to Mack's political connections and on August 4, 2005 wrote, "Mack's counsel will have 'juice' as I described last night—meaning that they may reach out to Paul and Linda (and possibly others)." A few months prior, on January 31, 2005, Berger had gotten an e-mail from Jan Lower, another attorney, describing in detail the $2 million potential earnings an SEC official could earn at Debevoise. where he continues to work. White denies asking the SEC to close any investigation. By 2006, both the Senate Finance Committee and the Senate Judiciary Committee were investigating the matter, culminating in what Forbes magazine called a "scathing" report. In testimony, Aguirre told the committee there needed to be better regulation of hedge funds to protect the public. He warned that fixing the SEC so it would protect investors and capital markets would not be easy because powerful Wall Street investment banks liked things as they are The joint report was officially released August 3, 2007. On April 28, 2008, the United States District Court for the District of Columbia, citing the Senate report extensively, ruled in his favor, forcing the SEC to turn over documents to Aguirre.

In 2007, Senators Chuck Grassley and Arlen Specter urged the SEC to reopen the case against Pequot, but it remained closed. Making extensive use of the documents released by the SEC to him, Aguirre uncovered incriminating evidence proving Pequot had engaged in insider trading of Microsoft and he shared this evidence with the SEC in a 16-page letter to SEC chairman Christopher Cox, dated January 2, 2009. Within days, the SEC re-opened the investigation,

A month later, the SEC agreed to pay Aguirre $5,000, an amount equal to four years and ten months of lost salary and attorney's fees. On reaching the settlement with the SEC for his wrongful termination, Aguirre said, "It's a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been the right message at the right moment for Wall Street elite: the SEC goes after big fish too." Pequot makes $18 million Paul Berger SEC Associate Director

SEC Associate Director Paul Berger inquires about a job with Debevoise & Plimpton SEC

Gary Aguirre The SEC threatens criminal charges against Aguirre if he provides incriminating records to the OSC Paul Berger Debevoise & Plimpton

Joins law firm Former SEC Associate Director Paul Berger joins Debevoise & Plimpton Gary Aguirre

SEC Gary Aguirre testifies before the U.S. Senate Judiciary Committee and asked, "And what, precisely did I write about Aguirre that was wrong?" Annette Nazareth SEC Commissioner

Leaves SEC SEC Commissioner Annette Nazareth leaves the SEC Annette Nazareth Davis Polk Partner

Joins law firm Former SEC Commissioner Annette Nazareth joins Davis Polk & Wardell Linda Thomsen SEC Enforcement Director

Leaves SEC SEC Enforcement Director Linda Thomsen leaves the SEC Gary Aguirre

The SEC agrees to pay Aguirre $755,000 based on four years and ten months of lost salary after Aguirre was fired by the agency in 2005, plus his attorney fees Return to private practice Aguirre now specializes in securities law, defending those victimized by investor fraud and those wishing to come forward to expose abuses. In 2008, he returned to San Diego with a reputation for winning cases.

He continued to work on the Pequot insider trading investigation, collecting and piecing together evidence, Because the SEC continued to stonewall, on May 26, 2010, Aguirre sought an order directing the SEC to release additional Pequot records to him. He argued that because the SEC had failed to file charges against Pequot or anyone else, under the FOIA, the SEC must turn over the records. The following morning, on May 27, 2010, using allegations that closely follow Aguirre's January letter, the SEC filed charges against Pequot, Samberg and Zilkha. The Fed was forced to reveal the information by Freedom of Information Act (FOIA) requests by Bloomberg News and Fox News, as well as provisions contained in Wall Street reform legislation. Flynn was interviewed by staff from three congressional committees in summer 2011 on the Deutsche Bank case and the destruction of files from thousands of preliminary investigation cases conducted by the SEC. Senator Grassley wrote a letter to the SEC about the document destruction and SEC inspector general H. David Kotz investigated the matter.

Predicted the 2008 financial collapse In 2006, while testifying before Senator Arlen Specter and the Senate Judiciary Committee about Mack, Pequot Capital and the SEC lack of oversight, he warned that SEC enforcement was dangerously lax. He said that the SEC had recovered a mere $110,000 from hedge fund insider trading over one year when the Committee itself had found evidence that over a one-year period, more than 41% of all mergers and acquisitions of over a billion dollars involved insider trading.

Continuing critic Aguirre is frequently quoted and interviewed in the media regarding issues related to financial and securities law and whistleblowers. Aguirre says the SEC has completely lost sight of its mission

On July 22, 2010, President Barack Obama signed Wall Street reform legislation, the Dodd–Frank Wall Street Reform and Consumer Protection Act, which included a provision to exempt the SEC from FOIA requests by the public. Aguirre used FOIA requests to obtain records relating to why his SEC superiors had stymied his Pequot investigation, charges which prompted two U.S. Senate committees to investigate. and a letter by Congressman Darrell Issa to Mary Schapiro, chairman of the SEC relied heavily on his article, "The Dodd-Frank Act: A FOIA Exemption for SEC Misconduct?" from Wall Street Lawyer. Congressional testimony by the Project on Government Oversight at a hearing on legislative proposals to address the problem referred to Aguirre's case as an example of the crucial need for public oversight of government agencies. Aguirre said the new bill would block public access to the SEC's records and hamper oversight. Other critics called the bill a "backroom deal" between the SEC and the U.S. Congress to cover up SEC failures. Obama signed the bill repealing the exemption on October 5, 2010.

Aguirre describes the SEC as an agency created to protect the public from Wall Street, but now protects Wall Street from the public, Robert Khuzami, who succeeded her, worked as a prosecutor in the U.S. Attorney's office in Manhattan's Southern District of New York, then went to Deutsche Bank for several years before returning being named SEC Enforcement Director.

The SEC's handling of the investigation of Pequot's $18 million profit on Heller Financial, contrasts sharply with their aggressive pursuit of a low-level GE employee and a kung fu instructor who made a much smaller trade on Heller, earning a profit of just over $150,000. According to Aguirre, decisions to pursue small cases and ignore the much larger ones involving the financial elite are less the exception, than the rule and explain why Bernie Madoff was ignored for so long. Baker & McKenzie and Jones Day investigated the bribery charges. Sempra's executive vice president and general counsel was previously a partner at Jones Day. Aguirre said, "The notion that there is a class of companies, Fortune 500 Companies and Wall Street banks and Wall Street in general who are able to conduct their own investigations through favorite law firms is repugnant to the host of regulations that require the SEC to be neutral, unbiased and treat everybody the same." and a law degree from Boalt Hall in 1966, Four of his professors were on the SEC staff, After graduation, he wanted to enter public service his younger brother, Michael, was the San Diego city attorney "Section 10(b) Has Hatched a New Theory of Securities Fraud, But Will It Fly?" (PDF) Consumer Attorneys of California Forum (January/February 2004) "The Dodd-Frank Act: A FOIA Exemption for SEC Misconduct?" (PDF) Wall Street Lawyer, Vol. 14, Issue 9 (September 2010) "SEC’s Madoff Miss Fits Pattern Set With Pequot" Bloomberg News (February 4, 2009). Retrieved February 18, 2011