“Few words define this administration better than “abuse” – in particular the oppressive tactics of Barack Obama’s turbocharged bureaucratic state. We interrupt your regular election broadcasting to present another example, this one courtesy of the Securities and Exchange Commission. The specifics of that case are long, complex and best weighed by a court of law. But they aren’t being settled by any outside court – and therein rests the abuse…

…Ever since the Dodd-Frank financial “reform,” the SEC has been pushing more cases toward in-house administrative-law judges. These judges are hired by the SEC and sit on the commission’s payroll. They have ultimate discretion over the cases they handle, and the rules severely limit discovery and depositions. In short, President Obama’s SEC gets to sit as prosecutor, judge and jury—and no surprise that the agency loves this setup. An analysis of SEC data by The Wall Street Journal last year shows why. Between October 2010 and March 2015, the SEC “won against 90% of defendants before its own judges in contested cases,” the report found. “That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period.”….Despite the obvious complexity of Ms. Tilton’s case, the SEC chose to bring its suit as an administrative proceeding—sheltering itself from the rules of evidence in federal court. Ms. Tilton had the temerity to call foul. Last April she filed suit against the SEC in federal district court, challenging the constitutionality of the agency’s administrative-law judges. The Tilton ordeal shows another Obama agency that—like the EPA or the IRS—seems to think it gets to operate outside the usual rules of democracy. This is an administration that is determined to have its way, whether by threats, or by unconstitutional appointments to agencies, or by ignoring the law. IfDonald Trump wants a line that will resonate across large parts of the electorate, he could do worse than simply this: “I promise as president to follow the Constitution.” Thanks to Barack Obama, that is unfortunately a new, low bar for the presidency.”, Kimberley A. Strassel, “The SEC Plays Judge and Jury”, August 5, 2016

Opinion

The SEC Plays Judge and Jury

How the agency has gone after Lynn Tilton is typical of Obama’s approach to politics.

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New York financier Lynn Tilton speaks with her attorneys after her hearing at the U.S. district court in New York, May 11, 2015. PHOTO: REUTERS

By Kimberley A. Strassel

Few words define this administration better than “abuse”—in particular the oppressive tactics of Barack Obama’s turbocharged bureaucratic state. We interrupt your regular election broadcasting to present another example, this one courtesy of the Securities and Exchange Commission.

The victim is an outspoken financier by the name of Lynn Tilton, the founder and CEO of Patriarch Partners LLC. By way of context, it’s worth noting that Ms. Tilton was an early critic of the Obama administration’s response to the financial crisis. In 2009 she traveled to Washington, D.C., to pitch her own legislation, a plan to offer rescue loans to small- and medium-size businesses. Not long after that trip, the SEC opened up an investigation. Early last year, the commissioners voted 3-2 to bring charges against her for allegedly defrauding investors.

The specifics of that case are long, complex and best weighed by a court of law. But they aren’t being settled by any outside court—and therein rests the abuse. Ever since the Dodd-Frank financial “reform,” the SEC has been pushing more cases toward in-house administrative-law judges. These judges are hired by the SEC and sit on the commission’s payroll. They have ultimate discretion over the cases they handle, and the rules severely limit discovery and depositions.

In short, President Obama’s SEC gets to sit as prosecutor, judge and jury—and no surprise that the agency loves this setup. An analysis of SEC data by The Wall Street Journal last year shows why. Between October 2010 and March 2015, the SEC “won against 90% of defendants before its own judges in contested cases,” the report found. “That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period.”

Despite the obvious complexity of Ms. Tilton’s case, the SEC chose to bring its suit as an administrative proceeding—sheltering itself from the rules of evidence in federal court. Ms. Tilton had the temerity to call foul. Last April she filed suit against the SEC in federal district court, challenging the constitutionality of the agency’s administrative-law judges.

This June, a divided panel of the Second Circuit Court of Appeals ruled, 2-1, that it lacked the jurisdiction to look at her case because the SEC hasn’t finished its administrative proceedings. Ms. Tilton has appealed to the full Second Circuit.

Meanwhile, she’s getting the treatment one might expect after challenging the agency’s authority. Take, for starters, the cash that the commission is attempting to part from her. In 2015, the SEC’s administrative-law judges ordered a total of $32 million in disgorgement and penalties, according to the agency. Ms. Tilton’s case alone demands disgorgement of nearly seven times that—$208 million.

There’s also the treatment that Ms. Tilton is getting at the hands of Carol Foelak, the administrative-law judge. When the Second Circuit’s panel ruled in June, it lifted a temporary stay on the SEC proceedings. Ms. Tilton at that time brought in a new team of high-powered lawyers from Gibson Dunn. They respectfully asked Judge Foelak to set a trial date in December—to give them time to prepare a defense against an SEC case more than five years in the making.

Even the SEC’s enforcement division argued for a December trial. The judge instead put it on the calendar for September. When Gibson Dunn again petitioned for a later date, the judge moved the case back by a few weeks to October, even as she warned the law firm against filing any further “frivolous” motions.

There’s a perception that the SEC is going out of its way to deny Ms. Tilton a fair shot. The Wall Street Journal’s 2015 analysis of the administrative-law judges prompted an internal SEC investigation. The commission adopted new rules this July that “reform” the system. The new rules don’t in any way fix the problem, but they at the very least allow defendants more latitude to collect witness depositions and other evidence to help in their trials. Yet the SEC is insisting that Ms. Tilton’s case must be tried under the old rules, those that were in effect when the proceedings began?

The Tilton ordeal shows another Obama agency that—like the EPA or the IRS—seems to think it gets to operate outside the usual rules of democracy. This is an administration that is determined to have its way, whether by threats, or by unconstitutional appointments to agencies, or by ignoring the law.

If Donald Trump wants a line that will resonate across large parts of the electorate, he could do worse than simply this: “I promise as president to follow the Constitution.” Thanks to Barack Obama, that is unfortunately a new, low bar for the presidency.

Posted on August 9, 2016, in Postings. Bookmark the permalink. Leave a comment.

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