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Why Isn't Wall Street in Jail? -- a synopsis of Matt Taibbi's recent article and interview

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Mary Jo White was the former U.S. attorney in the Southern District of New York, the top cop on Wall Street.   However, she quit that job and went to work for the corporate legal defense firm Debevoise & Plimpton where she was assigned the task of representing investment bank Morgan Stanley.   This is what all these investigators do:   When they leave a high-ranking position with the SEC or the U.S. attorney's office, they'll jump to these lucrative partnerships at corporate defense firms, where they make $2, $3, $4 million a year.   Because of these lucrative opportunities which they know are waiting for them, their incentive to really prosecute these SEC-rule breakers is slim to none:   Why would anyone at the SEC want to prosecute a potential future employer, especially if we are talking about a job that pays between 2 and 4 million a year?   So, like all the others, Mary Jo White had left her government job (U.S. attorney's office) and went to work for Debevoise & Plimpton, and was in a position to intercede on behalf of Mack.   Then, surprise surprise, one of the SEC officials that she was "dealing" with, Paul Berger, Aguirre's superior (who fired Aguirre), ended up working for Debevoise & Plimpton as well, a year later.   Presumably he was being rewarded for firing Aguirre and sparing Mack the investigation that might well have exposed the insider trading that hedge fund Pequot was involved in when, with privileged and advance information, it bought up Heller stock in advance of the GE takeover of Heller.   All this is typical Wall Street.   Which is to say that it happens regularly.

 

So Aguirre had to be fired.   He was initially told to investigate, he starts to seriously investigate, and is then told to stop.   He protests this, and he is fired.

 

Right.   Two days after he started work at the SEC, one of his superiors told him to "Look at this company."   So, within a year or so, he was onto the Samberg case, and he had targeted Mack as a clear suspect in the case.   Eventually he obtained overwhelming evidence.   There were emails, there was documentary evidence.   They put Martha Stewart in jail for much, much less than they had on Mack.

 

What exactly did they have on Mack?

 

They had emails demonstrating that Mack had been in touch by telephone with Pequot hedge fund manager Art Samberg.   They had documented evidence that Samberg had a personal relationship with Mack.   And they had the fact that Mack was clearly privy to the inside information.   He had had this meeting with Credit Suisse, Heller's investment banker.   Mack would later say that he destroyed his notes of his meeting with Credit Suisse on the way home from Switzerland, after that meeting.   But clearly, under any normal circumstances, he would have been targeted, would have been interviewed by the SEC, but in fact he was not interviewed by them.   Why not?   Because the SEC decided to drop the investigation when they found out that Mack was one of George Bush's fundraising "Rangers."

 

So Heller was bought up?

 

Yes, by GE.

 

And how much did Pequot Hedge Fund manager Samberg make from that?  

 

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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