Gary Aguirre, who led the Securities and Exchange Commission’s investigation into Pequot Capital Management Inc., said he was told by his supervisors that it would be difficult to obtain the subpoena because the executive had “very powerful political connections.”
The SEC was investigating whether the hedge fund had received a tip about an upcoming merger.
“By mid-June, growing evidence pointed to one person, the former CEO of a large investment bank,” Aguirre said in written testimony to the Senate Judiciary Committee.
Under questioning by committee members, he identified the executive as John Mack, who is the chairman and chief executive of investment house Morgan Stanley Inc.
Morgan Stanley, one of the largest US securities firms, said Aguirre had provided no evidence to support his allegation against Mack. “No one has provided any evidence that Mr. Mack has engaged in any wrongdoing and Mr. Aguirre provided none today,” a spokeswoman, Jeanmarie McFadden, said from New York.
Mack is an influential Wall Street figure and a major fundraiser for President Bush’s campaigns. At the time in question, he was chief executive of Credit Suisse First Boston.
The committee is looking into problems involving the growing hedge fund industry, which commands trillions of dollars in assets and is believed to account for as much as 20 percent of all US stock trading.
In his written testimony, Aguirre said the person he called “the suspected tipper” likely knew in advance about a merger offer, likely spoke with Pequot’s CEO just before he began to trade, “and had other personal and financial motives for tipping the hedge fund’s CEO.”