On June 4, 2015, we discussed the SEC’s Order in In the Matter of Timbervest LLC “inviting” administrative Law judge Cameron Elliot to submit 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 SEC “Invites” ALJ Cameron Elliot To Provide Affidavit on Conversations “Similar” to Those Described by Former ALJ. Well, ALJ Elliot either doesn’t think that fits his job description, or he just doesn’t like the idea of providing a sworn declaration to the SEC. On June 9, after considering the matter for four days, he tersely declined the invitation, saying only “I respectfully decline to submit the affidavit requested.” (This does suggest that, at least as to this ALJ, the President or his proxies at the Commission do not have much sway over an ALJ who has multiple layers of protection against being fired.)
That would seem to leave the SEC in a bit of a pickle. The Commissioners obviously thought there would be some value in gathering information on the issue of pressure on ALJs to act favorably to the Commission, which was raised by former ALJ Lillian McEwen with Wall Street Journal reporter Jean Eaglesham. See Fairness Concerns About Proliferation of SEC Administrative Prosecutions Documented by Wall Street Journal. The invitation to ALJ Elliot to supply data specific to him has now been rejected. The Commission apparently still has not acted on respondent Timbervest’s request for discovery on the issue. So what next step can the Commission take that doesn’t smack of arbitrarily ignoring the question, even after acknowledging it could be relevant? We can only wait and see. The Wall Street Journal reported that in a recent interview, Ms. McEwen explained that a sitting SEC judge would have difficulty discussing whether he or she felt pressure to favor the SEC, but that she said “she would ‘of course’ be happy to give evidence about her own experience” to the commissioners “if the agency decided to ask her for that.” See SEC Judge Declines to Submit Affidavit of No Bias.
We’ve called for the Commission to commence an open, independent, and transparent inquiry into what is now at least a potential appearance of bias in its administrative process. If that kind of review is occurring, it certainly is not open and transparent to interested observers. The outward appearance is that there is a strange paralysis on the issue. The longer the silence prevails, the more the appearance of this being a real issue has a chance to develop. With the courts now for the first time showing a willingness to scrutinize the SEC administrative law process in response to challenges raised by respondents (see Court Issues Preliminary Injunction Halting Likely Unconstitutional SEC Proceeding), paralysis — or stonewalling, if that’s what it is — would seem to encourage continued chaos. (Speaking of chaos, doesn’t it seem a little strange that in the wake of Judge May’s decision in Hill v. SEC that the appointment of ALJ James Grimes violated the constitution’s appointments clause, the SEC has taken no steps to address that issue? Instead, following Judge May’s ruling, ALJ Grimes was appointed to preside over a new proceeding: see Order Scheduling Hearing and Designating Presiding Judge in In the Matter of R. Scott Peden.)
June 11, 2015
Contact Straight Arrow privately here, or leave a public comment below: