Gary Aguirre, a former Securities and Exchange Commission attorney who was fired in 2005 when he tried to subpoena an elite Wall Street banker, has been vindicated. The SEC agreed to pay Aguirre $755,000 to settle his wrongful termination case before the Merit Systems Protection Board in what is described as the largest settlement of its kind.

“The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what Wall Street elite needed to hear at the perfect moment: the SEC goes after big fish too,” Aguirre said.

Of course, that didn’t happen. SEC regulators – who are all federal government employees – didn’t go after anybody. They were AWOL before the Great Crash of ‘08.

Aguirre found evidence of insider trading of 20 public companies by Pequot Capital Management of Westport, Conn. But branch chief Robert Hanson, his supervisor at SEC, blocked his subpoena of John ‘The Knife” Mack, who was then being considered for CEO of Morgan Stanley,  because Mack had “juice’”and “political clout.”  SEC officially cleared Mack of any wrongdoing in December 2006.

Days after Aguirre protested, he received a negative evaluation “outside the SEC’s ordinary performance appraisal process.”  A month later, he was fired without warning.

A month ago, Pequot founder Arthur Samberg paid SEC $28 million to settle the SEC’s insider trading case against the company – “without admitting or denying the allegations” – based on information uncovered by Aguirre that Samberg used illegal insider tips (allegedly from Mack) to trade Microsoft options, generating $14.2 million in profits for the firm.

SEC Inspector General H. David Kotz recommended that the supervisors who fired Aguirre be disciplined, but the SEC has still not done so.  So the only real damage was done to
Aguirre, the lone SEC employee who actually tried to stop the illegal activity.

“Unfortunately, this large settlement is the exception that proves the rule,” said Government Accountability Project Legal Director Tom Devine, who is pushing for greater congressional protection of whistleblowers like Aguirre. “Until Congress provides real protections for financial regulatory employees such as Aguirre, existing law will remain the best excuse for government regulators to turn a blind eye.”