A Sad Tale of a Captured Agency

The New York Times today has a compelling article on the Gary Aguirre-Pequot Capital-John Mack mess at the SEC. It is a damming portrayal of an agency that has been pretty near completely captured by the institutions it is supposed to regulate.

The fact that the SEC is a captured regulator is nothing new, and I delve into the history of that phenomenon in Wall Street Versus America. But it is still galling to read the dirty details. The common denominator seems to be the revolving door between the SEC and the law firms that represent Wall Street and miscreant companies.

Corporate and Wall Street malfeasance has been a Full Employment Act for SEC lawyers, as they go through the revolving door at SEC headquarters.

The Aguirre mess, indeed, is good news for corporate wrongdoers -- because it indicates that cash-on-the barrel political influence and the "good old boy" network is continuing to shield Corporate America from the consequences of its actions.

What you get for hiring the right people is the right to have the SEC bungle the investigation of you, apparently:

Among the commission’s failings, the report said, were delays in the Pequot investigation, disclosure of sensitive case information by high-level S.E.C. officials to lawyers for those under scrutiny, a detrimental narrowing of its scope after a meeting with a Pequot lawyer, and the appearance of “undue deference” to a prominent Wall Street executive that resulted in the postponement of his interview until after the case’s statute of limitations had expired.

So every time you hear about delays in SEC investigations, ask yourself this question: Is the SEC slow because it is understaffed and overworked, or is it slow because it is understaffed and overworked and SEC lawyers are waiting out the clock? Or unwilling to antagonize future employers?

© 2007 Gary Weiss. All rights reserved.



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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.