|
Tilton, the head of private equity firm
Patriarch Partners, appeared in court as one of her lawyers
asked U.S. District Judge Ronnie Abrams in Manhattan to declare
the SEC's in-house court system unconstitutional.
"She's facing an administrative proceeding that is
unconstitutional at its core," said Christopher Gunther, a
lawyer for Tilton.
Lawyers for the U.S. Justice Department defending the SEC
countered that the system was proper, and that any challenge
Tilton wanted to make would need to wait until after her trial,
which is set for Oct. 13.
"You still have to go through the process, and then you get
judicial review," said Jeannette Anne Vargas, a Justice
Department lawyer.
The hearing marked the latest challenge in federal court to the
SEC's use of administrative proceedings, which have grown since
the 2010 Dodd-Frank Wall Street law provided the agency with the
power to bring more cases in-house.
SEC administrative law judges preside over the cases, which are
typically fast-tracked and lack some protections that defendants
typically enjoy in more traditional court settings.
Defense attorneys complain the process is unfair. They point to
statistics showing the SEC last year won 100 percent of
administrative cases before its own judges.
Tilton, 56, is one of the most high-profile defendants to bring
a lawsuit seeking to challenge the constitutionality of the
administrative process.
Following a five-year investigation, the SEC charged Tilton and
Patriarch in March, saying they hid the poor performance of
assets underlying three "Zohar" collateralized loan obligation
funds they managed that had raised more than $2.5 billion.
The SEC said those actions enabled Tilton's firms to collect
almost $200 million of fees and other payments to which they
were not entitled.
Tilton and Patriarch deny wrongdoing, saying their investment
strategy was consistently disclosed from the funds' inception.
Tilton sued the SEC in April, arguing its in-house court
violates the Constitution because administrative law judges
qualify as executive branch officers, yet enjoy job protections
that can make their removal by the president impossible.
The SEC's lawyers argue the judges constitute not officers, but
employees who have only the authority the commission itself
delegates to them.
The case is Tilton v. Securities and Exchange Commission, U.S.
District Court, Southern District of New York, No. 15-02472.
(Reporting by Nate Raymond in New York. Editing by Andre Grenon)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
|
