WITH THE SECURITY & EXCHANGE COMMISSION’S (SEC) USE OF ADMINISTRATIVE LAW JUDGES UNDER CONSTITUTIONAL ATTACK, SHOULD SIMILAR CHALLENGES ALSO BE MADE TO THE SBA AND/OR THE TREASURY DEPARTMENT FOR THEIR USE OF ADMINISTRATIVE LAW JUDGES OR HEARING OFFICERS TO PRESIDE OVER CERTAIN ADMINISTRATIVE APPEALS AND PROPERTY DEPRIVATION HEARINGS IN CONNECTION WITH SBA LOAN DEFAULT?
This video identifies certain constitutional arguments applied to SEC enforcement cases - that may also be argued as "litigative risk factors" relating to the SBA and/or Treasury Department's respective uses of Administrative Law Judges or Hearing Officers in adjudicatory and property deprivation matters relating to SBA loan debt.
The video's written transcript has been re-produced below for even further consumption and review by interested readers.
"A federal district court judge ruled that the U.S. Securities & Exchange Commission’s (SEC) use of an Administrative Law Judge (ALJ) to hear an SEC case matter violates the U.S. Constitution. The issue arose from a change made by the Dodd-Frank Act that authorizes the SEC to pursue its cases seeking penalties before one of its Administrative Law Judges versus filing a civil case in federal district court.
Defense attorneys protest that this specific approach gives the SEC a “home court” advantage. Unlike a federal court case, an administrative proceeding allows for little discovery of evidence. It also does not allow a jury to determine whether a defendant committed a violation.
Equally important, the initial decision at an administrative hearing is made by an ALJ hired by the SEC, which is being contested in federal district court as a violation of the U.S. Constitution. The Appointments Clause of the Constitution provides that “the Congress may by law vest the appointment of such inferior officers, as they think proper, in the president alone, in the courts of law, or in the heads of departments.”
Recently, an United States District Court judge, Leigh Martin May in Atlanta, GA, held that this procedure used by the SEC to appoint its judges was unconstitutional, and she issued an injunction order stopping an administrative SEC case against a self-employed real estate developer/trader.
Several defendants in these federal agency cases before the SEC have filed lawsuits in federal district courts challenging the SEC’s authority to select the administrative forum. Most of the arguments center on the claim that the administrative proceedings violate their right to have a jury decide their case, and that the appointment of the ALJ violates the U.S. Constitution.
None of those challenges had ever succeeded until Federal District Court Judge May issued her order in the subject case. Most of the SEC defendants lost on the preliminary issue of whether a federal district court could even consider the case.
Judge May determined that the SEC could not adequately review the constitutionality of the status of Administrative Law Judges. The next question involved whether an Administrative Law Judge is an “officer” of the federal government under the Appointments Clause, and therefore must have been appointed by the President or a department head, rather than an employee of the agency.
In Buckley v. Valeo, the U.S. Supreme Court said that “any appointee exercising significant authority pursuant to the laws of the United States is an ‘Officer of the United States.’” Judge May held that the SEC’s in-house ALJs had significant authority because “they take testimony, conduct trial, rule on the admissibility of evidence, and can issue sanctions.”
The ALJs are not appointed by the SEC commissioners, but instead are hired by the federal agency’s personnel office, just as average employees are. Therefore, Judge May found that the process of appointing them was most likely unconstitutional, requiring that the administrative proceeding at issue must be stopped until she could fully review the constitutional question. In response to her decision, the ALJ postponed the SEC enforcement case at issue.
How do these issues relate to SBA and/or Treasury debt collection cases and should these “constitutional” legal questions be raised as they relate to SBA Office of Hearings & Appeal matters or AWG Hearing cases before assigned Hearing Officers?
1/ Your SBA Attorney, Federal Agency Attorney-Practitioner or qualified representative should be raising these constitutional issues before the SBA or the Treasury Department – especially where certain “property” interests are subject to deprivation.
2/ In cases where an SBA obligor (personal guarantor on an SBA loan) has received notice that their case has been referred to the Treasury Department and has received an official Notice of Intent to Initiate Administrative Wage Garnishment (AWG), then your representative should consider making arguments that the appointment of an ALJ or Hearing Officer (the latter has been happening more frequently lately) is unconstitutional such that the appointment is entirely biased and favors the federal government.
3/ In several AWG hearing matters, the Hearing Officer that has been appointed to consider and decide issues such as:
a/ legal enforceability of the SBA debt;
b/ nature and the amount of the SBA debt; and/or
c/ whether the alleged SBA obligor has sustained his/her burden of proof that the proposed AWG would cause “severe financial hardship” as defined by applicable law (i.e. IRS collection standards)
1/ an appointed ALJ (rare situation);
2/ an attorney employed by the SBA (appears to be unconstitutional as noted by the SEC arguments shown above, bias, prejudice and other purported due process violations);
3/ a Treasury or Bureau of Fiscal Service employee who is not an attorney and thus, does not have the qualification or competence to discern legal issues and arguments."
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