John J. Mack

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John J. Mack (born John Makhoul in 1944) is the CEO and Chairman of the Board of Morgan Stanley, one of the world's largest investment banks. He worked for the company for nearly thirty years before leaving in 2001 only to return on June 30, 2005 to replace Phil Purcell, who had become CEO after the 1997 merger of Morgan Stanley and Dean Witter, of which Purcell was already CEO.

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[edit] Early life and education

Mack was born in 1944 to Lebanese immigrants of Melchite Greek Catholic and Greek Orthodox origin. His father, Charles, came to America at the age of 12, following his father who had arrived at Ellis Island in 1908 and had settled in North Carolina.[1] Mack graduated from Duke University in 1968, where he attended on a football scholarship and is now a member of the Board of Trustees.[2]

[edit] Business career

Mack began his career with Morgan Stanley in 1972 as a bond trader. He was promoted to Vice President in 1976, and then to managing director three years later. The taxable fixed-income division became one of the most profitable under his direction and he was promoted to company President in 1993. He earned the nickname "Mack the Knife" during his ascension to the top of the company ladder, known for his aggressive cost cutting and consolidation, managerial efficiency, yelling matches, and brutal treatment of others.[2]

He left Morgan Stanley in 2001 after a "bitter power struggle with Purcell."[3] From 2002 until July 2004, Mack was Co-CEO of Credit Suisse First Boston, now known as Credit Suisse, where he eliminated about 10,000 jobs, cut costs by about $3 billion, and turned the company around to post a huge profit.[4] Mack's legacy of department consolidation and cost cutting additionally referred to the $400 million in compensation he persuaded Credit Suisse bankers to return during his three years there.[2] Mack claimed in 2003 to Harvard Business School students that his managerial style has grown "softer."[2]

Mack also served as Chairman of Pequot Capital Management for a month in 2005.[5]

[edit] Insider trading accusations

Mack was accused by former SEC investigator Gary Aguirre of insider trading. Mack allegedly tipped off hedge fund Pequot Capital about a 2001 merger deal between GE Capital and Heller Financial. In the testimony by Aguirre at a Senate Judiciary Committee hearing in June 2006, Aguirre said that Pequot had amassed a short position in General Electric shares in the weeks before the deal and a long position in Heller, and the $7 billion hedge fund earned some $18 million in profit once the deal was announced. Aguirre said that he was fired from the SEC on September 1, 2005 because he was aggressively pursuing the investigation and wanted to interview Mack about the findings. According to Aguirre, his efforts to talk to the politically well-connected Mack were blocked by senior SEC officials. This allowed Mack enough time to secure his position as CEO of Morgan Stanley. Had he been investigated in mid 2005 by the SEC, Mack would not have been a viable CEO candidate for Morgan Stanley.

On August 22, 2006, Senate Finance Committee Chairman Charles Grassley stepped up pressure on the SEC to provide documents related to a congressional inquiry into why the agency ended an investigation into hedge fund firm Pequot Capital Management. Grassley said that the SEC hasn't responded quickly enough to requests for documents and interviews and complained about the agency's practice of prohibiting employees from disclosing information about ongoing investigations, according to a copy of a letter he sent to SEC Chairman Christopher Cox. The letter was distributed to news organizations. [3]

On October 5, 2006, the SEC recommended no action be taken against Mack. [4] In late November, it notified Mack and Pequot that the investigation had been closed and no action would be taken against them. On December 5, 2006, in written testimony before the Senate Judiciary Committee Linda Thomsen, the SEC's top enforcer, two other SEC investigators, and one former associate director of her division denied that that Mack was shielded from questioning. SEC investigators interviewed Mack on August 1, 2006. [5]

It has also been alleged by many within the SEC that Gary Aguirre was a disgruntled, "odd" figure at the SEC prior to his dismissal.

Grassley has asked the Government Accountability Office to open a probe of the SEC's enforcement division and compliance department.[5] The Senate Finance and Judiciary Committees conducted an investigation of Aguirre's allegations. On August 3, 2007, they issued a comprehensive joint staff report concluding the year-long investigation.[5]

[edit] Other

He is Chairman of the Board of Trustees of New York-Presbyterian Hospital (the University Hospital of both Columbia and Cornell Universities), a Trustee of the Doris Duke Charitable Foundation and a Director of Cousins Properties Incorporated. In 2005, The C.J. Mack Family Foundation provided an endowment arranged by Mack to the United States Naval Academy Foundation to support the Admiral Frank Bowman Scholar Program.

[edit] Notes

  1. ^ [1] [2]
  2. ^ a b c d “John J. Mack Profile”, Portfolio.com, <http://www.portfolio.com/resources/executive-profiles/27332>. Retrieved on 30 November 2007 
  3. ^ Gasparino, Charles (2005-07-13), “Could John Mack Come Back?”, Newsweek, <http://www.msnbc.msn.com/id/7384337/site/newsweek/>. Retrieved on 6 May 2007 
  4. ^ “Mack Attack”, Business Week, 2006-07-03, <http://www.businessweek.com/magazine/content/06_27/b3991060.htm>. Retrieved on 6 May 2007 
  5. ^ a b c "SEC Denies Politics Derailed Probe of Mack, Pequot", Bloomberg News, December 5, 2006

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