SEC Administrative Law Judge Cameron Elliot just issued another procedural ruling in In the Matter of Laurie Bebo and John Buono, File No. 3-16293, that shows how SEC prosecutors are accorded great advantages in their home administrative courts. The order is available here: Order Denying Motion To Compel and Granting in Part Motion n Limine. We previously discussed the unfairness of Ms. Bebo’s administrative proceeding here: SEC ALJ Cameron Elliot Shows Why In re Bebo Should Be in Federal Court, and here: In re Bebo Shows Why SEC Administrative Proceedings Have Fairness Issues.
Bebo moved to compel the notes of interviews conducted by SEC lawyers of potential witnesses in the case. ALJ Elliot denied that motion, and ordered that SEC lawyers could not be called to testify about those interviews as well. He ruled that “Each set of notes is plainly an ‘internal memorandum, note or writing prepared by a Commission employee.’ 17 C.F.R. § 201.230(b)(1)(ii). Such documents are, with certain exceptions inapplicable here, not subject to production. Id. To the extent Bebo seeks material exculpatory evidence contained within the notes, such evidence need not be disclosed by production of the notes themselves…. Although Bebo correctly observes that the Federal Rules of Civil Procedure provide a mechanism for discovery of attorney work product, those Rules are inapplicable here.” Bullseye!
On the issue of calling SEC lawyers as witnesses he said: “demanding the deposition or examination of opposing trial counsel is almost always pure gamesmanship. I am deeply disappointed that Bebo has chosen this course instead of simply following my guidance. I intend to give both sides a fair hearing, and I expect all parties and all counsel to behave like professionals; if not, it will be a very long hearing indeed.” He may be “deeply disappointed,” but it is he, not the lawyers, who is acting unprofessionally by making such a comment. They are doing the best job they can to defend their client in an uphill battle in an unfair forum. He has no business calling that “unprofessional.” In fact, SEC lawyers on a prosecution team have been ordered to testify in discovery depositions in federal court enforcement proceedings if they may have relevant testimony that could have a bearing on the case. By attacking defense counsel for trying to get a similar order here, ALJ Elliot is showing questionable fitness for the job of adjudicating a case in which Ms. Bebo’s future freedom to serve as an executive or director in a public company is at issue. Filing a motion in court is not “unprofessional,” Mr. Elliot. It is called “making a record” so that ultimately real judges in real courts have before them the necessary facts to rule on the legality of your proceeding.
So ALJ Elliot provided a short, neat lesson to SEC Enforcement Director Andrew Ceresney on why the SEC is so much more successful in administrative enforcement proceedings than in those litigated in federal court. See Ceresney Presents Unconvincing Defense of Increased SEC Administrative Prosecutions. Not only is Bebo’s attempt to even the playing field by learning about what potential witnesses said to the SEC barred by the SEC Rules of Practice, but Ms. Bebo has no way to gather that information for her defense because there is no possibility for discovery depositions of these third parties. And the judge gets belligerent with defense counsel just for doing their jobs. The end result: the SEC knows what these potential witnesses have to say, how strong their testimony might be, and how favorable or unfavorable they are towards Ms. Bebo, and Ms. Bebo’s counsel is forced to litigate in the dark. And the judge serves notice that aggressively pursuing Ms. Bebo’s case will be met with rancor. You call that fair, Mr. Ceresney?
Hopefully, Ms. Bebo’s strong record of how she is being disadvantaged in the administrative forum will bear fruit when she finally gets the chance to have a court of appeals review the constitutionality of transferring important law enforcement actions against non-regulated persons into the SEC’s administrative courts.
April 6, 2015
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