S.E.C. and Critics to Square Off in Senate

The Securities and Exchange Commission may have ended its investigation of Pequot Capital Management last week, but the questions surrounding the inquiry keep coming. Today, Linda C. Thomsen, the S.E.C.’s director of enforcement, and eight others are scheduled to go before the Senate Judiciary Committee to testify about allegations by former S.E.C. lawyer Gary Aguirre that the agency prematurely halted its inquiry after it led them in the direction of John Mack, Morgan Stanley’s chief executive.
The New York Times reports that a second S.E.C. official, who is also on Tuesday’s witness list, asked to be removed from the Pequot inquiry because of his serious misgivings about decisions made on the case. The Wall Street Journal writes that Ms. Thomsen will tell the committee that Mr. Aguirre “resisted standard supervision, and ignored the S.E.C.’s chain of command.”
Like Mr. Aguirre, S.E.C. investigator Eric Ribelin believed that the inquiry “was not handled right,” Senator Arlen Specter, the chairman of the Judiciary Committee, told The Times. “Something smells rotten here,” Mr. Ribelin wrote in an e-mail message to an S.E.C. supervisor last year.
Mr. Aguirre, who led the hedge fund investigation until he was fired last year, has told members of Congress that senior S.E.C. officials blocked him from taking testimony from Mr. Mack. S.E.C. officials deny that their probe of Mr. Mack was blocked by politics. Ms. Thomsen said in testimony prepared for today’s hearing that the S.E.C. has sued “captains of industry, presidential cabinet members, members of Congress and celebrities. The enforcement division does not pull its punches.”
The S.E.C. is also under review by the Government Accountability Office, the investigative arm of Congress. Charles E. Grassley, the Iowa Republican who is chairman of the Senate Finance Committee, asked for the review in September because he was growing concerned, he said, about whether the S.E.C. was “faithfully adhering to its mission.”
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