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Senate Panel Wants Investigation of SEC "Revolving Door"

According to the Wall Street Journal, the Senate Finance Committee has asked David Kotz, the inspector general of the Securities and Exchange Commission, to review the recent departure of a top SEC official who went with a high-frequency trading firm. Kotz replied that he is looking into "a prominent law firm's significant ties with the SEC." The prevalence of SEC attorneys leaving the agency to join this firm may have led to the agency's failure to take appropriate actions in a matter involving the law firm, Kotz said. Kotz knows, but isn't saying, that the big Wall Street law firms control the SEC by dangling big jobs in front of SEC lawyers supposedly investigating the firms' clients.

There are a couple of local examples. San Diegan Gary Aguirre worked for the SEC. He wanted to interview John Mack on suspicion that he had passed information on a pending merger to hedge fund Pequot. Mack was being considered for the top job at Morgan Stanley. (He got it.) The firm hired a big law firm that massaged agency brass behind Aguirre's back. Aguirre's boss let the word out that he would like a job with that law firm. He got one. Aguirre was fired. The agency official who passed on the word that Berger might like to join the law firm was Lawrence West. Two Congressional committees and Kotz investigated the Aguirre situation. All sided with Aguirre. (Pequot recently closed down after insider trading evidence surfaced in a related case.)

Lawrence West had been the SEC official in charge of the Peregrine Systems fraud. John Moores, who had dumped $487 million of Peregrine stock during the fraud period, hired Chuck La Bella to quarterback a whitewash of the Peregrine board, including Moores. The law firm doing the study was Latham & Watkins. West blessed the Latham & Watkins study. In 2005, he went to work for Latham & Watkins. Moores walked -- to Houston.

There is no evidence that Kotz was talking about either the Pequot or Peregrine situations.

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According to the Wall Street Journal, the Senate Finance Committee has asked David Kotz, the inspector general of the Securities and Exchange Commission, to review the recent departure of a top SEC official who went with a high-frequency trading firm. Kotz replied that he is looking into "a prominent law firm's significant ties with the SEC." The prevalence of SEC attorneys leaving the agency to join this firm may have led to the agency's failure to take appropriate actions in a matter involving the law firm, Kotz said. Kotz knows, but isn't saying, that the big Wall Street law firms control the SEC by dangling big jobs in front of SEC lawyers supposedly investigating the firms' clients.

There are a couple of local examples. San Diegan Gary Aguirre worked for the SEC. He wanted to interview John Mack on suspicion that he had passed information on a pending merger to hedge fund Pequot. Mack was being considered for the top job at Morgan Stanley. (He got it.) The firm hired a big law firm that massaged agency brass behind Aguirre's back. Aguirre's boss let the word out that he would like a job with that law firm. He got one. Aguirre was fired. The agency official who passed on the word that Berger might like to join the law firm was Lawrence West. Two Congressional committees and Kotz investigated the Aguirre situation. All sided with Aguirre. (Pequot recently closed down after insider trading evidence surfaced in a related case.)

Lawrence West had been the SEC official in charge of the Peregrine Systems fraud. John Moores, who had dumped $487 million of Peregrine stock during the fraud period, hired Chuck La Bella to quarterback a whitewash of the Peregrine board, including Moores. The law firm doing the study was Latham & Watkins. West blessed the Latham & Watkins study. In 2005, he went to work for Latham & Watkins. Moores walked -- to Houston.

There is no evidence that Kotz was talking about either the Pequot or Peregrine situations.

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