Yesterday, the SEC issued an unusual order In the Matter of Timbervest LLC et al., an administrative proceeding currently before the agency. Although styled an "Order," the missive from the SEC was actually an extraordinary "invitation" directed to Administrative Law Judge Cameron Elliot. The Commission stated that

we are hereby inviting ALJ Elliot to file by July 1, 2015, 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. 

The May 6 article referenced in the SEC's Order was written by the WSJ's Jean Eaglesham. Eaglesham reported that from October 2010 through March 2015, the SEC won against 90% of defendants in contested administrative proceedings (as compared to a 69% success rate against defendants in federal court during the same period). The article further noted that in contested administrative proceedings before Judge Elliot, "he has found all of the 28 defendants who came before him in contested cases liable on at least some of the charges the SEC enforcement arm had brought against them."

 

The article also detailed an allegation of bias from Lillian McEwen, who was an SEC ALJ from 1995 to 2007. McEwen told the WSJ 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. 

 

Respondents in the Timbervest case argue that the "administrative forum lacks impartiality," and have sought discovery including depositions of Judge Elliot, Judge Murray and former Judge McEwen on whether there is pressure on ALJs to rule in favor of the Commission. In yesterday's Order, the Commission stated that it believed its consideration of the respondents' motion for discovery and depositions would be assisted by the submission of the affidavit from Judge Elliot.

 

The Commission emphasized in its Order that any submission by Judge Elliot "would be voluntary on his part." The Commission further stated that if Judge Elliot does elect to submit the affidavit, that

We request that ALJ Elliot not consult with anyone at the Commission in the preparation of his affidavit concerning the substance thereof, and that he confirm in his affidavit that no such consultations or discussions occurred.

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