SEC “Invites” ALJ Cameron Elliot To Provide Affidavit on Conversations “Similar” to Those Described by Former ALJ

In the administrative proceeding In the Matter of Timbervest, LLC et al., File No. 3-15519, the SEC issued an order “inviting” ALJ Cameron Elliot to provide an affidavit “addressing whether he has had any communications or experienced any pressure similar to that alleged in the May 6, 2015 The Wall Street Journal article, ‘SEC Wins With In-House Judges,’ and whether he is aware of any specific instances in which any other Commission ALJ has had such communications or experienced such pressure.”  See Order Concerning Additional Submission and Protective Order.  This in response to a motion by Timbervest for discovery into the conversation reported in the Wall Street Journal between former ALJ Lillian McEwen and current Chief Administrative Law Judge Brenda Murray some years ago before Ms. McEwen’s retirement, in which ALJ Murray allegedly said Ms. McEwen’s rulings were not as favorable to the SEC staff as they should be.  See SEC Broadens Constitutional Inquiry into Its Own Administrative Judges in Timbervest Case and Fairness Concerns About Proliferation of SEC Administrative Prosecutions Documented by Wall Street Journal.

The Commission appears still not to have acted on Timbervest’s motion for discovery into the alleged McEwen conversation, as the most recent order says it does not express the Commission’s views on the disposition on that motion.  But it appears that the Commission is striving to find a way to deny the discovery request by “inviting” ALJ Elliot to deny he ever had such conversations or was aware of similar conversations or “pressures,” after which they will likely deny the request for discovery because it has no bearing on the specific case before them.  Such reasoning would be a wholly inadequate way to address the issue because it relies solely on a voluntary submission by ALJ Elliot without any supporting record, and does address the broader issue of a potential systemic bias that could infect the SEC’s administrative law process.  It would be a grave mistake for the SEC to ignore the “red flag” raised by former ALJ McEwen on the theory that even if the conversation occurred, it is mere history and not relevant unless a presiding ALJ acknowledges to having had a similar discussion.

Instead of taking an open and transparent approach to this issue, the Commission seems to be circling its wagons, looking for any excuse not to examine a serious potential concern about its administrative enforcement process.  This is exacerbated by the unusual step of ordering that any affidavit from ALJ Elliot — which the SEC says he is free not to provide if he prefers not to — must “be maintained under seal in order to provide the affiant confidentiality.”  What need for confidentiality could there be on the issue of whether the presiding ALJ in this case participated in, or is aware of, discussions that suggest ALJs act favorably to the SEC staff in administrative proceedings?

The Commission continues to take the wrong approach here.  It should, like Caesar’s wife, be “above suspicion.”  By failing to pursue this issue thoroughly and openly, and instead trying as hard as possible to cloak it in secrecy, the Commission leaves the sore to fester.

Straight Arrow

June 4, 2015

Contact Straight Arrow privately here, or leave a public comment below: