WASHINGTON (AP) — Four enforcement officials at the US Securities and Exchange Commission rejected allegations by a former agency attorney of political interference in an insider-trading investigation of Wall Street executive John Mack and a major hedge fund.But another SEC official, also in sworn testimony to the US Senate Judiciary Committee, bolstered the claims by fired attorney Gary Aguirre.

Eric Ribelin, branch chief of the SEC’s market surveillance office, testified said that one of Aguirre’s supervisors told Ribelin that because Mack was prominent, SEC attorneys “would have to be careful” about interviewing him in the investigation.

In a September 2005 e-mail that committee Chairman Arlen Specter, R-Pa., read at the hearing, Ribelin wrote to a supervisor: “I have serious misgivings about many of the decisions made in this investigation. ... Something smells rotten.”

At Tuesday’s hearing, scrutiny focused on the normally low-profile agency and its handling of the investigation into hedge fund Pequot Capital Management Inc.

“At best, it looks like extraordinarily lax enforcement by the Securities and Exchange Commission,” Specter declared. “At worst, it has the overtone of a possible cover-up.”

After listening to lengthy testimony in which Aguirre and Ribelin on the one hand and the four SEC enforcement officials on the other contradicted each other, Specter said, “It’s very, very troubling what the SEC has done here.”

The four officials — Aguirre’s supervisors at the agency and Enforcement Director Linda Thomsen — portrayed him as a hard-charging and aggressive attorney who also was volatile and given to fits of temper, and had trouble accepting the authority of supervisors and working in a structured organisation.

They rebutted Aguirre’s assertion that he was fired in September 2005 after he tried to subpoena Mack, now the chairman of investment house Morgan Stanley Inc., in the Pequot investigation.

Aguirre led the investigation, begun last year to determine whether Pequot had received a tip in 2001 from an individual about an upcoming $5.3 billion merger between General Electric Capital Corp. and Heller Financial Inc.

Aguirre has pointed to Mack as the likely person who had tipped Pequot to the merger, potentially enabling the hedge fund to buy and sell shares ahead of the announcement and make millions.

Aguirre says his SEC supervisors told him it would be difficult to obtain the subpoena because Mack had powerful political connections.

“I did not say that to Mr. Aguirre as he states,” testified Robert Hanson, branch chief in the enforcement division. “I have no recollection of making that statement.” Hanson said he was not even aware of Mack’s political connections and status as a major fundraiser for President Bush’s campaigns.

He called Aguirre’s assertions of interference “utterly false.”

Said Thomsen: “We follow the facts” wherever they lead and without regard to the prominence of possible targets.

The enforcement division “does not pull its punches,” she testified. Aguirre “had ... personality conflicts with other staff” and “his continued resistance to supervision created a substantial risk of future errors,” Thomsen said.

Ribelin, by contrast, testified that he was surprised that Paul Berger, then the enforcement division’s associate director, “did not seem as though he was aggressive” early last year in supporting Aguirre’s attempts to get e-mails requested from Mack and others in the probe.

Ribelin said he was “stunned” and “outraged” to learn Aguirre was fired while on vacation.

Specter and Sen. Charles Grassley, R-Iowa, also sharply criticised the investigation of the matter by Walter Stachnik, the SEC’s inspector general, whose office functions as an independent watchdog.

Stachnik’s office had closed its inquiry, without interviewing Aguirre, with a finding that the evidence it developed did not support his allegations. After Aguirre went public with the allegations last June, Stachnik decided to reopen the investigation and to interview him.

“You don’t seem to be respecting Mr. Aguirre very well in this whole process,” Grassley told Stachnik. “You may be playing footsie with a branch of government that wants to curb congressional investigations.”

The SEC notified Mack and Pequot last week that it had completed its investigation and is taking no action against them.On the Net:

Securities and Exchange Commission: http://www.sec.gov

Pequot Capital Management Inc.: http://www.pequotcap.com