WASHINGTON - The U.S. government is rejecting a recent ruling by a federal judge which found that the Securities and Exchange Commission 's procedures for bringing charges against defendants in its in-house court may violate the Constitution.
In a letter made public on Wednesday evening, the U.S. Justice Department's civil division, writing on the SEC's behalf, declared the June 8 decision by an Atlanta -based federal judge to be "wrongly decided" and riddled with flaws.[ID: nL1N0YU225]
The letter marks the first time the U.S. government has formally responded to a decision made on Monday by U.S. District Judge Leigh Martin May in a case involving Charles Hill , a real estate developer.
The SEC is pursuing civil insider-trading charges against Hill through its own in-house administrative court, instead of through a federal court.
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Hill, like many other defendants, is challenging the legal venue, amid concerns it may violate his rights. SEC administrative trials differ from federal court trials.
They are typically expedited, lack discovery and are initially decided by SEC administrative law judges, who are on the agency's payroll.
The agencies who employ administrative law judges can seek their removal, but such a move must also be reviewed by the Merit Systems Protection Board .
Hill and other defendants who are challenging the SEC's use of in-house trials contend the process violates the separation of powers clause in the Constitution because such judges qualify as "inferior officers" subject to removal by the president.
Because administrative law judges are afforded an extra layer of job protection, they say this is unconstitutional because the president cannot remove them.
On June 8, May ruled that the in-house trial against Hill should be stayed until she can weigh the constitutional challenge. In her ruling, she said Hill had demonstrated a "likelihood of success" in his claim.
The Justice Department's letter takes issue with this finding.
