In a report issued January 21, 2016, the SEC's Office of Inspector General concluded that there was no evidence to support allegations of bias on the part of Administrative Law Judges in the SEC's administrative proceedings. As previously discussed here, the allegation surfaced in a May 6, 2015 article in The Wall Street Journal ("SEC Wins With In-House Judges") in which former ALJ Lillian McEwen claimed that during her time as an ALJ, the SEC's chief ALJ Brenda Murray "questioned my loyalty to the SEC” for finding too often in favor of defendants. 

 

On August 7, 2015, the SEC's OIG disclosed that it was examining the allegations at the request of SEC Chair Mary Jo White. In the final report issued last month, the OIG stated that:

The OIG did not develop any evidence to support the allegations of improper influence. Former and current staff affiliated with the Office of ALJs, including McEwen, stated that all decisions were made independently and free from influence of SEC Chief ALJ Murray. Conversely, several individuals interviewed during this investigation indicated that Murray emphasized fairness and independence of the Office. and some noted only systemic factors that impacted complete adjudicative independence, such as Commission precedent and the rules of practice. 

After interviewing 15 witnesses, including eight current and former ALJs, the OIG further found that with the exception of McEwen's allegations, the criticisms that Murray made of the ALJs working under her were

not related to the substance of their decisions when presiding over cases, but rather to the timeliness in which they issued their decisions and/or the procedural quality oftheir work. Furthermore, the OIG investigation identified only possible reference to loyalty by Murray, but the reported emphasis was loyalty to the quality of the ALJ process and not loyalty to the SEC Division of Enforcement (ENF).

The OIG also inquired about the unusual "invitation" made by the SEC to ALJ Cameron Elliot asking him to file an affidavit "addressing whether he has had any communications or experienced any pressure" to find in favor of the SEC in his cases. Judge Elliot, you may recall, declined to do so. In his interview with the OIG, Judge Eliot explained that he decided on his own, without consulting with anyone else at the SEC, not to provide the affidavit for "multiple reasons" that he did not elaborate on to the OIG. ALJ Jason S. Patil told the OIG that Judge Elliot was "strong willed and independent minded" and Judge Patil believed Judge Eliot "just felt like he didn't want to do it."

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