A recent post described the common, but little known, Article II courts and how they offend the most basic principles of due process of law and judical independence which most familiar with the rule of law would have imagined enshrined in the Constitution. Now the Wall Street Journal has published an article Fairness of SEC Judges Is in Spotlight
(Nov. 22, 2015)Subscription possibly required. Link to non-gated version much appreciated. offering some striking quotes and statistics illustrating this point.
The SEC ALJs expressly defer to the SEC prosecutors. Here is how one dismissed a defense motion for summary judgment:
[The chief ALJ] for the Securities and Exchange Commission told eight stockbrokers to give up on the idea that she would toss the case against them without first holding a hearing.
Clad in a black robe, Judge Brenda Murray explained to the brokers that the commissioners who run the SEC and approve all the civil charges filed by the agency don’t want its judges second-guessing them.
So for me to say I am wiping it out,Ms. Murray said at the hearing last year,it looks like I am saying to these presidential appointee commissioners, I am reversing you. And they don’t like that.
It is virtually inconceivable that an independent Article III judge would dismiss a defense motion on the basis that the presidentially appointed U.S. Attorney bringing the charges would not like … to be second guessed.
Any Article III judge who acted on such a basis, much less one who stated it, would properly be subject to Congressional impeachment. However, the SEC’s Chief ALJ feels no compunction about openly expressing such an attitude.
The SEC won against 86% of defendants in contested cases in its own courts from October 2010 through September 2015, according to an updated analysis by The Wall Street Journal—significantly higher than the agency’s 70% win rate in federal court.
These figures are even more shoking when flipped: A defendant in an independent Article III court has a 30% of prevailing against the SEC. Moving proceedings to the SEC’s ALJs cuts this chance by more than half to 14%.
Thomas McGonigle, a former SEC enforcement official who is now at the law firm Murphy & McGonigle, said the SEC judges aren’t deliberately biased, but the system itself appears inherently skewed toward the agency.
The SEC and its trial team get the benefit of the doubt in that forum,he said.
This is probably an accurate assessment. Several ALJs of the author’s acquaintance are fine and honest lawyers who try to conduct fair trials. But the setting and the institutional incentives make this almost impossible. Hence, neither the original article, nor this followup, should be read as a criticism of all ALJs, but of a system that makes due process of law unachievable.
Judge Cameron Elliot, a 49-year-old former nuclear-submarine officer and SEC judge since 2011, has found the defendants liable in every contested case he has heard, the analysis showed. He dismissed a case for the first time in August, despite finding the defendant liable, saying any sanctions would be
overkill.In another glimpse inside the SEC’s court, Mr. Elliot told the defendants during settlement discussions on a case they should be aware he had never ruled against the agency’s enforcement division, said a person who was there. The judge said the defendants might therefore want to do a deal with the agency rather than fight their case at a hearing before him, the person said.
What would be the reaction of the public and the organized bar to a judge who never ruled against the prosecution and pointedly reminded any defendant who refused to plead guilty of that fact?
SEC judges are appointed and paid by the agency. When not traveling, they work from offices in the agency’s main headquarters in Washington. The SEC’s organizational chart shows the judges reporting to the agency’s commissioners.
The system of Article II courts cannot be reformed (and should have been held unconstitutional). The only solution is to dismantle it entirely and create a corresponding number of new independent Article III judgeships (for which some of the current ALJs may be plausible candidates). Until this happens, no person’s liberty or property is safe from the arbitrary will of the Executive.
