SEC whistleblower: Galleon case shows agency is finally stepping up scrutiny

Busting billionaire hedge fund manager Raj Rajaratnam last week is a sign that the Securities and Exchange Commission is paying much closer attention to insider-trading rings , according to a former SEC enforcer-turned whistleblower. In particular, the SEC’s use of wiretaps to track Mr. Rajaratnam and others involved in a $20 million insider trading case “is definitely a positive step showing that they are taking it seriously,” said Gary Aguirre, who claims he was fired in 2005 from his job as an SEC lawyer because he ruffled political feathers. “It’s about time,” he said of the agency’s more aggressive stance on insider trading. Mr. Aguirre contends that he ran afoul of SEC officials when he initiated an insider-trading investigation of Morgan Stanley chief executive John Mack. His superiors shut down the case and after he complained internally about what he viewed as political interference, Mr. Aguirre was fired. A September 2008 report from the SEC’s inspector general found that “there was a connection between the decision to terminate Aguirre and his seeking to take John Mack’s testimony.” Even though the Rajaratnam case shows progress, Mr. Aguirre said the SEC is still not adequately monitoring hedge funds. In particular, the SEC needs to investigate insider trading on credit default swaps, he said, which are not monitored like U.S. equity markets. Regarding his own case against the SEC, Mr. Aguirre is still attempting to get a hearing at the U.S. Merit Systems Protection Board, which handles complaints from government employees. The SEC is fighting that action, he said. An SEC spokesman declined to comment.