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Matt Taibbi writes: "More fun details about your new chief of the SEC. Do you feel safer? I know I do."

President Obama's choice to head the SEC, Mary Jo White. (photo: Nicole Bengiveno/NYT)
President Obama's choice to head the SEC, Mary Jo White. (photo: Nicole Bengiveno/NYT)


More Fun Details About Mary Jo White

By Matt Taibbi, Rolling Stone

01 February 13

 

few more things about Mary Jo White, the former prosecutor and corporate lawyer recently chosen by Barack Obama to head the SEC. Last week, I wrote about White's involvement in the notorious Gary Aguirre episode, wherein the former U.S. Attorney and then-partner at the hotshot white-shoe defense firm Debevoise and Plimpton helped squelch then-SEC investigator Aguirre's insider trading case against future Morgan Stanley CEO John Mack.

White, who was representing Morgan Stanley in this affair, went over Aguirre's head to talk directly to then-SEC enforcement chief Linda Thomsen about "reviewing" the case. After Aguirre was fired and the case against Mack went away, the official responsible for terminating the case, Aguirre's boss Paul Berger, was given a lucrative, multimillion-dollar job with Debevoise and Plimpton, closing the circle in what looks like a classic case of revolving-door corruption.

There are a few more troubling details about this incident that haven't been disclosed publicly yet. The first involve White's deposition about this case, which she gave in February 2007, as part of the SEC Inspector General's investigation. In this deposition, White is asked to recount the process by which Berger came to work at D&P. There are several striking exchanges, in which she gives highly revealing answers.

First, White describes the results of her informal queries about Berger as a hire candidate. "I got some feedback," she says, "that Paul Berger was considered very aggressive by the defense bar, the defense enforcement bar." White is saying that lawyers who represent Wall Street banks think of Berger as being kind of a hard-ass. She is immediately asked if it is considered a good thing for an SEC official to be "aggressive":

Q: When you say that Berger was considered to be very aggressive, was that a positive thing for you?

A: It was an issue to explore.

Later, she is again asked about this "aggressiveness" question, and her answers provide outstanding insight into the thinking of Wall Street's hired legal guns - what White describes as "the defense enforcement bar." In this exchange, White is essentially saying that she had to weigh how much Berger's negative reputation for "aggressiveness" among her little community of bought-off banker lawyers might hurt her firm.

Q: During your process of performing due diligence on Paul Berger, did you explore what you had heard earlier about him being very aggressive?

A: Yes.

Q: What did you learn about that?

A: That some people thought he was very aggressive. That was an issue, we really did talk to a number of people about.

Q: Did they expand on that as to why or how they thought he was aggressive?

A: I think and as a former prosecutor, sometimes people refer to me as Attila the Hun. I understand how people can get a reputation sometimes. We were trying to obviously figure out whether this was something beyond, you always have a spectrum on the aggressiveness scale for government types and was this an issue that was beyond real commitment to the job and the mission and bringing cases, which is a positive thing in the government, to a point. Or was it a broader issue that could leave resentment in the business community or in the legal community that would hamper his ability to function well in the private sector?

It's certainly strange that White has to qualify the idea that bringing cases is a positive thing in a government official - that bringing cases is a "positive thing . . . to a point." Can anyone imagine the future head of the DEA saying something like, "For a prosecutor, bringing drug cases is a positive, to a point?"

One would think that even a defense firm would value a regulator with an aggressive rep - after all, a tough lawyer is a tough lawyer. What this testimony shows is that what is valued instead in this rarefied community of millionaire lawyers (where one can easily "get a reputation") is a talent for political calculation, and a sensitivity to what may or may not hamper one's ability to "function in the private sector." What they're looking for is someone who, when sitting in the regulator's seat, does the job, but doesn't live the job, if you catch the distinction.

Given that White has already made this move from enforcement to defense once, and given that we now know that she knows that firms like hers value regulators who can avoid creating "resentment in the business community" and retain their ability to "function in the private sector," I think it's safe to expect that White's SEC will take very good care to bring cases, but only "to a point."

A few more things about White and the Aguirre case. There's one extremely interesting section of the SEC Inspector General's report on the whole affair, and sheds some light on how these Wall Street attorneys work.

To quickly recap the case: Mack, the former president of Morgan Stanley, was between jobs in the early 2000s. He went to Switzerland to interview with Credit Suisse First Boston for a top post there. CSFB at the time was the investment banker for a company called Heller Financial, which was in the process of being acquired by GE. Right after Mack came back from Switzerland, he called an old friend, a hedge fund trader named Art Samberg from a company called Pequot Capital. Almost immediately afterward, Samberg, who had never held a meeting about Heller Financial or done any research in the firm, began buying up Heller stock. Weeks later, the acquisition took place and Samberg made $18 million. Mack, meanwhile, was cut into a Pequot deal that netted him $10 million.

In investigating this case, Aguirre sent a subpoena to Morgan Stanley for records of emails between Mack and Samberg. Now, remember, Mack by the time of the suspicious trades was no longer working for Morgan Stanley (he would return to be its CEO years later, but at the time, he had just stepped down from the presidency). Nonetheless, Aguirre wanted all the emails Mack had sent to Samberg and vice versa during Mack's first stint at Morgan Stanley. All he was looking for was proof that the two knew each other - and for some essentially circumstantial evidence about their level of chumminess.

Aguirre's theory had always been that the source of the Heller tip had been the Credit Suisse interview. He never believed that Mack somehow passed the tip to Samberg while he was still at Morgan Stanley.

Nonetheless, White called then-SEC Enforcement Director Linda Thomsen when Morgan Stanley received the subpoena, and tried to run a little game on the SEC. The SEC Inspector General later summarized White's testimony about that call:

White said she asked Thomsen "if we could accelerate the production of those emails [which were responsive to an SEC subpoena issued in the Pequot case] did she think the SEC might be in a position to say something more about Mr. Mack's exposure or not."

In other words, White proposed to Thomsen that she could speed up the response to the subpoena, if Thomsen in turn could review the emails and make a swift judgment about Mack's exposure based on that evidence - evidence that not even Aguirre thought would contain anything truly substantive about the insider trade.

Aguirre thought Mack got the tip in Switzerland. White had to know the tip could not have come from Morgan Stanley. She knew these particular emails would not show the source of the trade. Yet she wanted Thomsen to make a judgment about Mack's exposure based on this evidence. This is the sort of legal leprechaun trick that former regulators like White get paid by the banks millions of dollars a year for.

Two days after White's call to Thomsen, Morgan Stanley sent a CD full of documents over to the SEC - not to Aguirre, but presumably to someone higher up, possibly Thomsen. Again, the Mack case subsequently went away, and Aguirre was subsequently deemed a pain in the ass for complaining about this and fired. The SEC subsequently paid Aguirre a record $755,000 wrongful termination settlement.

More fun details about your new chief of the SEC. Do you feel safer? I know I do.

 

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+76 # Walter J Smith 2013-02-01 09:57
Oh, yes, Matt, I feel much better now. I wouldn't want Wall Street to go all wobbly in the knees at the idea that some silly spineless politically appointed government regulator (appointed by a silly spineless elected official) might actually take their OFFICIAL job more seriously than they take their career-ladder-c limbing job.
 
 
+65 # HowardMH 2013-02-01 11:16
Walter, you nailed it, and the stupid people and they are STUPID, just let it happen and do nothing about it.

As Forest Gump said, “Stupid Is as Stupid Does” and there is obviously a whole lot of stupid out there.

Having already downed a few power drinks, the blonde turns around, faces the guy next to her, looks him straight in the eye and says,
"Listen here, good looking, I will screw anybody, anytime, anywhere, their place, my place, in the car, front door, back door, on the ground, standing up, sitting down, naked or with clothes on... It doesn't matter to me. I just love it."

His eyes now wide with interest, he responds, "No kidding....... I'm in Congress too. What state do you represent?
 
 
+8 # Walter J Smith 2013-02-02 10:12
Thanks, Matt. Within minutes of posting that, I recieved in my email box an automated response from the SEC with a major pile of words about all their requirements in order for them to consider my letter to them (that comment is the only thing I've ever "sent" them) as something regarding their policies.

And it isn't as though I asked them to be spying on my blog comments, but,hey, when Fascists rule, they do their best to prove they know what the are doing.

Who needs more proof they don't?
 
 
+54 # dick 2013-02-01 11:16
Obama gives good speech. But REAL Obama is reflected in his relations with Wall St. Very Cheneyish.
 
 
+17 # gdp1 2013-02-01 11:29
...mary jo....she a ho...but in a world of hoes....one doesn't have to hold one's nose...
 
 
+40 # Martintfre 2013-02-01 11:39
More foxes hired to guard the hen house.

This is what fascist do.
 
 
+14 # EPGAH3 2013-02-01 17:55
This isn't guarding the henhouse with foxes, this is making the henhouse OUT OF LIVE FOXES!
(Sorry for the caps, I can't find the Bold command on this thing)
 
 
+12 # Merschrod 2013-02-01 12:02
Let's face it, given what she knows about the backgrounds of both sides it would normally be a conflict of interest for her to take the case.

But, as Matt describes the career paths, it IS in her interest to take the case!

BTW HowardMH's joke is priceless too.
 
 
+24 # wolflady52 2013-02-01 12:33
Looking at what happened after the last financial meltdown, the SEC's teeth are obviously dentures...kept in a glass and rarely, if at all, used. We can look for more of same from Mary Jo White. No one gets punished...busi ness as usual.
 
 
-9 # Scotty44 2013-02-01 13:11
So Matt doesn't have any solid evidence that the Mack case affected the Berger hire, only that the SEC were suckers for White's ploy. He doesn't connect Berger with the disk of emails, allowing that he might have dismissed upon the recommendation of Thomsen. And he doesn't get clarification at what point an attorney is too aggressive in White's opinion. Given Obama's track record, what Matt presents doesn't look good for investors and tax payers. But this is just not nailed down tight enough that it overrides Elliot Spitzer's opinion that we should wait and see how she performs the job. Spitzer is too sharp and has worked for the public good too long for me to ignore his opinion based on the innuendo that Matt presents. Knowing that Maddow was going to ask him about White, I don't think he would damage his credibility by making a naïve recommendation.
It would be nice if White worked out like Joseph Kennedy did for Roosevelt. He came from WS, but eliminated the shady avenues that had allowed him to accumulate his wealth anyway. Spitzer's point about White not being motivated by money, since she is wealthy, seems similar to Kennedy's situation.
 
 
+16 # harbormon 2013-02-01 14:03
Scotty44, your Pollyanna-like assumption that Spitzer has nothing to gain by taking a "wait and see" attitude regarding this decision couldn't be any further from reality. Like so many other public figures who have been disgraced and subsequently forgiven for far worse indiscretions than Spitzer's dalliance with a paid escort, he is desperate to be allowed back into the Club.

Publicly towing the party line, both politically and as a paid political commentator, on such a significant appointment, and one that he knows the in-depth truth about more than virtually anyone other than the criminal masterminds themselves, demonstrates (to me) that he is willingly selling his credibility for readmission to the VIP section of the Club.

I came from that world and I only wish Spitzer had been allowed to stay his course in his investigations and prosecutions of Wall Street. Given the gross malfeasance that occurred before, during and after the collapse of the world financial markets in 2008 with one of his main culprits, AIG, being the most egregious perpetrator, he very well have could have helped the country avoid one its most calamitous missteps in our short history.
 
 
+3 # EPGAH3 2013-02-01 17:58
That makes 2 of us, both Clinton and Spitzer got their whistles blown when they were just about to do something "too productive". Clinton was about to invade Iraq, and Spitzer was about to nail (pun intended) the mortgage business.
I don't have a Deterministic Gate, I can't tell if either attack would've been effective, but they should've at least been allowed to TRY!
And since they were going to ruin their careers over it, couldn't they have found if not beautiful, then at least less-ugly whores to screw them (and possibly the whole country)?
 
 
+2 # Art947 2013-02-02 14:35
Please note that Spitzer was Governor of NY when his indiscretions impelled him to resign. He had already stopped being an Attorney General and serving as the "sheriff of Wall Street." He would have nothing to do with the mortgage fiasco at that time.
 
 
+4 # Scotty44 2013-02-01 22:57
What evidence do you have that Spitzer is desperate to be allowed back into the Club? Was he in "the Club" when he was doing so much good work?
 
 
-14 # nice2blucky 2013-02-01 13:36
Where are the phony-progressi ve Obama supporters -- the anti-Republican s? Did they hurt their phony little coward necks turning from the truth that Obama's constant and consistent actions reveal his hollow rhetoric (lies)? As if any more revealing is possible, although it is inevitable?

I am worried that when the O administration approves the XL Keystone pipeline, if they even notice, that they'll be catatonic for life.

But then again, the power of delusion will save them, as always.

Where is their outrage over clear implications of crony capitalism? ... Oh, I forgot, ... there is nothing he could do. It's the obstructionist Republicans and the Blue Doggies...

They really are the cowards and fools that facilitate the neo-con/corpori tist agenda. And any time a revealing article like this appears, they are nowhere to be found ... nothing to say anyway; except they are surely clicking the red thumb of disapproval.

But until these strategically retarded followers of everything Democratic-Part y are publically disgraced and ridiculed verbally and in writing -- or whatever it takes to keep them from arrogantly and pompously regurgitating and/or selling the sophistic excuses and rationales for designed failure or proping up establishment Democrats as solutions for anything, the inexorable slide toward bad policies, unaccountable elites, and unrepresentativ e government will continue -- with so-called Democrats/progr essives as the cause ... not the bad ol' Republicans.
 
 
+30 # harbormon 2013-02-01 14:30
First, there is nothing "phony-progress ive" about Obama supporters. They, like me, believed he was, and is, the best man for the job based on the available choices. And if your rhetoric wasn't so one dimensional and antagonistic, I'm sure you would find many true progressive liberals on this thread who are as distressed about many of our President's seemingly misguided choices, and even specific policies, both in this term and his first.

I have been a "Yellow Dog" liberal for over 40 years, and for the first time in my life, I am questioning not only our President's decisions themselves, or lack thereof, but the possible motives behind them. This appointment is one of them, and along with the heinous National Defense Act and blatant attack on Habeus Corpus, it leaves me speechless, outraged and embarrassed.

Don't get me wrong, I still think your comments are vitriolic and come from recent defeat, but my antenna is up higher than ever before and I'm second guessing myself on many issues that historically I would never have questioned in our Party's leadership.
 
 
-7 # nice2blucky 2013-02-01 17:48
So what you are really saying is that you still don't get it.

... Hillary 2016 here we come.
 
 
+4 # Scotty44 2013-02-02 12:32
Hillary is a plutocrat. If one doesn't look outside the two party system, one is part of the problem.
 
 
0 # nice2blucky 2013-02-02 14:53
Huh?

Did you read what I wrote above?

Since it's more important that you get "it" rather than me, I forgive your misunderstandin g of (attempted) sarcasm.

I dread the idea that the same rigidly naive or wilfully-bilnd fools who obstructed or discouraged a Democratic Primary challanger against Obama will climb aboard the Hillary 2016 train.
 
 
+7 # Scotty44 2013-02-02 12:39
No. He wasn't the best man available, and there was even a woman that would have been better. Now is the time to think outside the two party frame.
 
 
+1 # hoodwinkednomore 2013-02-03 02:35
Excellent, harbormon!! Just right on...
 
 
+1 # terrison 2013-02-02 01:08
I imagine some of those thumbs down may be a response to being called "strategically retarded" among the other insults you flung.
 
 
-6 # nice2blucky 2013-02-02 16:51
Those are not insults. They are observations -- and important ones at that; something to learn from.

Well, ... some are insults, but even those are just part of larger points. And nor were they "flung;" they are right on target.
 
 
0 # Walter J Smith 2013-02-02 10:18
Well, there was one up there before your comment representing the pie-in-the-sky pro-Obama wait-until-afte r-he-does-once- agian-what-he-a lways-does view.

And, who knows? Obama could see the light. Yet the indications of that having happened are all dark.
 
 
+6 # BobbyLip 2013-02-01 13:50
Not that I'm a big capital punishment guy, but isn't this the kind of thing that gets one swinging from a rope in China?
 
 
-6 # EPGAH3 2013-02-01 18:00
I AM a big Capital Punishment Guy, because even if it doesn't have the Almighty Deterrent Effect, it STILL means one less criminal and one less animal in a cage at $250,000 a night!

Besides, China has upgraded to beheading now, and they recycle criminals' organs, whether the family "wants" it or not. This dishonor alone is supposedly a deterrent, but given the size of some of China's prison complexes, it's about as effective as our "Deterrent"!
 
 
+11 # ghostperson 2013-02-01 14:12
All federal agencies that are supposed to administer, monitor, supervise and/or regulate activities in which there is Big Money involvement are typically headed by industry insiders be they former officials or lobbyists and run for the benefit of the industries. I observed it for 35 years and was appalled.

For an interesting episode check out the inspector general's report on MMS at the Department of Interior, including MMS's "sex chicks" one of whom had a lucrative side business of selling sex toys and "fraternizing" with energy company boyz which was the subject of many published articles.
 
 
-1 # rradiof 2013-02-02 00:05
Oh, c'mon all of you, it's not Mary Jo White,it's Colonel Rosa Klebb. By the way, her name is a Soviet pun for women's rights: "khleb i rozy" = "bread and roses." The perfect thing about White vis a vis Klebb, is that both defected. Klebb from SMERSH to SPECTRE. White from the DOJ to private practice defending those who she "prosecuted." Thank god for James Bond who killed Klebb. Mary Jo White a/k/a Rosa Klebb and SMERSH/SPECTRE now runs the SEC. "From Russia With Love." Over and out.
 
 
0 # rradiof 2013-02-02 00:48
I will try again. Mary Jo White = Colonel Rosa Klebb. "From Russia With Love"--will Matt Taibbi do the right thing, just like James Bond. Over and out.
 
 
+7 # ghostperson 2013-02-02 21:20
I am reading a book "Arrogant Capital" by Kevin Phillips, one of his many books.

His premise is that the ability to revitalize our political system by grass roots action is being lost due to the influence of a permanent political, interest-group and financial elite in D.C., N.Y. and Boston and that it is time to take that influence back have.

Phillips notes that aging great-power cultures often become parasitic. They cluster in ambitious, swollen urban populations joined together in pursuit of money and power. They suck the life force out of everything they come into contact with. He points out, however, that the power clusters start to rot or atrophy before the grass roots populace entirely loses its own vitality. This was written nearly two decades ago. Bottom line: time is of the essence for people to get the lead out.

Goldman Sachs is the center of gravity in this empowered, moneyed universe of a nearly permanent elite where consequences for others, like the subprime debacle, do not matter. Goldman Sachs makes money in good times and bad because it is unparalleled in its global power and connections. Matt Taibbi calls Goldman Sachs, around for the better part of 145 years, "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Count the number of presidential economic advisors that have come from the squid.
 
 
+3 # harbormon 2013-02-03 09:49
I have read Phillip's book and many other articles he has penned, and the thesis that the system is [almost] permanently corrupted is correct. The only shining light of grass root's organization occurring from the bottom up (albeit with funding from the top down) was the President's 2012 campaign. I was a part of that effort and we delivered heretofore Red counties in a bible belt-buckle southern state known for its knee jerk conservatism without direct help from any of the urban power clusters. It's not to late to mobilize and given the current Republican gerrymandered restructuring that has occurred in over 33 states in the last two years, our work is going to be more difficult than ever before and the need to unwind the "power clusters" more critical than ever.

One side bar: the Goldman-lead Investment Bank orgy that gave rise to the systemic collapse of the Mortgage backed securities markets (MBS) worldwide was not directly the fault of the Mortgage makers themselves. The true culprit was the market making activities of the secondary and tertiary markets lead by Goldman, Lehman and Merrill that knowingly created these bad investment securities, ostensibly underwrote them, bought insurance from AIG in a bid against their failure, and then packaged this bad investment paper with good--a felony act by any legal standards. And as Taibbi has pointed out, this single factor should be the basis of a criminal investigation in some very substantial power clusters immediately.
 
 
+3 # ghostperson 2013-02-03 18:20
Absolutely. I read and am now re-reading The Big Short by Michael Lewis. Indeed an eye opener. I am working my way back to Liar's Poker. The best line I have read so far from any source was about Lloyd Blankfein. Obama said that CEOs want to be paid like rock stars while lip syncing capitalism. The top tier financial world is basically a three-card Monte game that just moves money around with out producing any productive output or gains.
 
 
+1 # Replicounts 2013-02-06 12:12
Sheep in wolf's clothing?
 

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