Certain trades that occurred at Pequot Capital Management in 2001 in advance of General Electric’s acquisition of Heller Financial have now reportedly led, in the most roundabout way, to the demise of Pequot Capital itself.

As previously discussed here, before the GE-Heller Financial deal was publicly announced in the summer of 2001, Pequot’s Arthur Samberg directed the purchase of “a little over a million shares” of Heller Financial stock and also directed Pequot to short shares of GE during the same time period. After the acquisition was announced, Samberg sold the Heller stock and covered the GE short position, resulting in approximately $18 million in profits over a period of a few weeks.

These trades set in motion nine – nine! – subsequent investigations by entities including the SEC’s Division of Enforcement (twice), the Senate Finance and Judiciary Committee (twice), the SEC’s Inspector General (twice), an SEC Initiating Official (reviewing the SEC’s Inspector General’s disciplinary recommendations), the FBI, and prosecutors in the SDNY.  (See the full list of nine here).

Today brings news that these trades and the most recent SEC Enforcement investigation have led Samberg to the “painful conclusion that it is necessary to wind down Pequot’s business.”  In a letter dated May 27 addressed to Pequot’s clients, Samberg stated that in the coming months Pequot will liquidate and return cash to investors.  Samberg notes that while the original investigations by the SEC and US Attorney’s Office were closed in 2006 without any charges being brought,

In late 2008, the government reopened its investigation. Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction. With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business as an investment advisor.