SEC Inspector General Out After Senate Bashes Pequot Probe

Aug 8 2007 | 9:35am ET

On the same day as a Senate report blasting him was released, Securities and Exchange Commission Inspector General Walter Stachnik quietly retired.The report, which chronicled the SEC’s failures in an insider-trading probe of hedge fund Pequot Capital and its then-chairman, Morgan Stanley CEO John Mack, found that Stachnik’s office had “failed in its mission” to look into claims by Gary Aguirre, an SEC lawyer, that Mack was getting favorable treatment. Aguirre was later fired, in part, he claims, for speaking up about what he saw as that favorable treatment.

The SEC said Stachnik, the agency’s first and only inspector general who took the job in 1989, had planned his retirement in advance of the report. But it has not officially announced his departure, nor named an interim inspector general to take his place.

“The SEC’s Office of Inspector General failed to conduct a serious, credible investigation of Aguirre’s claims,” the report said, adding that within the regulator the inspector general is “not well respected” and is seen as “a tool of management, used for retaliatory investigations against disfavored staff.”

“The SEC needs to take immediate action to restore the independence, competence and confidence” in the inspector general, the Senate report said.

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