Hedge Fund Giant Says U.S. Probed Possible Insider Trading

Pequot Capital Management Inc., a $7-billion hedge-fund firm, said Friday it was probed by securities regulators for possible insider trading and denied it did anything wrong.

“At all times, Pequot’s securities trading has been entirely proper and not based on insider information,” said Jonathan Gasthalter, a spokesman for the Westport, Conn.-based firm.

Gary Aguirre, a former Securities and Exchange Commission lawyer, said he investigated a hedge fund that he alleged made millions on insider trading. Those profits included $18 million on General Electric Co.’s $5.25-billion acquisition of commercial lender Heller Financial in 2001, he said in a May 30 letter to two U.S. senators. Pequot was the hedge fund, according to Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).

Aguirre, 66, said he was fired Sept. 1 after losing an argument at the SEC over whether he could take testimony from a well-known Wall Street executive. The New York Times, citing unnamed government officials with knowledge of the allegations, said John Mack was the executive. Mack is chief executive of Morgan Stanley and was briefly chairman of Pequot in June 2005. From July 2001 to June 2004, he was head of Credit Suisse First Boston, one of Heller’s advisors in the GE deal.

Aguirre said in his letter that he suspected that the executive might have tipped Pequot off about the merger. Aguirre’s lawyer couldn’t be reached for comment. The SEC declined to comment on whether Pequot was under investigation.

Pequot was once the world’s largest hedge-fund firm with $15 billion in assets.