SEC Investigation Findings

SEC INVESTIGATION FINDINGS -- (Senate - January 31, 2007)

Mr. GRASSLEY. Mr. President, I am very happy to be on the floor with my colleague Senator Specter on something we have worked on together over a long period of time, and it falls very much into the category of congressional oversight. I am not going to go into the details now because I have a statement I want to use as a basis for our cooperation, and then you will hear from Senator Specter. I want to say how great it was to work with Senator Specter.

We are here to update the Senate on the interim Finance Committee findings of the joint investigation into the Securities and Exchange Commission that was conducted by the Finance Committee on the one hand, and the Judiciary Committee on the other, during the 109th Congress.

Before I go into details, there is another person I would thank for his cooperation. I want to take this opportunity to thank Securities and Exchange Commission Chairman Christopher Cox for his cooperation in providing access to thousands of pages of documents, as well as interviews with the staff at the Securities and Exchange Commission. Chairman Cox's cooperation was very essential to our ability to conduct our constitutionally mandated oversight of Federal agencies.

That said, I hope Chairman Cox takes today's findings to heart and will work to implement recommendations Senator Specter and I plan to put forth into the forthcoming final report.

Today, we want to update the Senate on some of the details of our investigation, which began early last year when allegations were presented to our staffs by former Securities and Exchange Commission attorney Gary Aguirre. Mr. Aguirre described the roadblocks he faced in pursuing an insider trading investigation while he was employed as a senior enforcement attorney at the Securities and Exchange Commission. Specifically, he alleged his supervisor prevented him from taking the testimony of a prominent Wall Street figure because of his ``political clout,' which obviously should not be ignored if an agency is doing the job they should be doing.

Well, after Mr. Aguirre complained about that sort of preferential treatment given to somebody with ``political clout,' his supervisors terminated him from the SEC while he was on vacation.

The interim findings we released today outlined the three primary concerns shared by Senator Specter and me. First, the SEC's investigation into Pequot Capital Management was plagued with problems from its beginning to its abrupt conclusion. Second, the termination of Mr. Aguirre by the SEC was highly suspect given the timing and the circumstances. Thirdly, the original investigation conducted by the SEC Office of Inspector General was both seriously and fatally flawed. The inspector general's failure required our committees to take a more thorough look at Mr. Aguirre's allegations and examine this matter closely. Taken together, these findings paint a picture of a troubled agency that faces serious questions about public confidence, the integrity of its investigations, and its ability to protect all investors, large and small, with an even hand.

The SEC should have taken Mr. Aguirre's allegations more seriously and very seriously. Instead, it does like too many agencies do when under fire: it circled the wagons and it shot a whistleblower--an all too familiar practice in Washington, DC. As we know, whistleblowers are about as welcome as a skunk at a picnic.

There is more information to follow and more details that need to come to light. Senator Specter and I together plan on releasing a comprehensive report in the near future. For now, I hope these interim findings will spur the SEC to consider meaningful reforms. I urge all my colleagues to read these important interim findings and to read the final report when it is made available.

I yield the floor.

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