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 When he was a federal prosecutor, Elliot was known for being
deliberate, unflappable and for going after powerful interests,
including violent gang members and the activist group Greenpeace.
Now, more than a decade later, Elliot is making waves as an
administrative law judge for the U.S. Securities and Exchange
Commission.
He is one of three such judges who have become increasingly
influential, as well as controversial. Critics say the internal
court system gives the SEC a home-court advantage.
The impact of the court was on full display when Elliot sided with
the SEC on January 22 in a blunt 112-page opinion that slapped the
Chinese units of the "Big Four" accounting firms with a six-month
U.S. industry suspension.
Elliot scolded the firms for failing to hand over audit documents
the SEC wanted to pursue fraud investigations against U.S.-listed
Chinese companies.
The ruling hits the Chinese units of Deloitte,
PricewaterhouseCoopers, Ernst & Young and KPMG.
In particular, Elliot denounced the firms for knowingly putting
themselves in a situation in which they could not comply — due to
Chinese secrecy laws — and then saying they should be relieved of
their duty because they invested substantial money setting up shop
in China.
"Such behavior does not demonstrate good faith, indeed, quite the
opposite — it demonstrates gall," Elliot wrote.
It was arguably one of the most significant rulings in the history
of the SEC's administrative courts. If the Big Four lose an appeal,
companies would need to find a new auditor during the suspension
period or face having their shares suspended.
It also comes at a time when the legal venue is growing in
importance. In the 2010 Dodd-Frank law, Congress expanded the SEC's
power to seek penalties in its home administrative court against a
broader array of defendants, a move that has made these proceedings
more attractive to SEC enforcement lawyers.
Unlike court hearings, administrative proceedings are overseen by
judges who are on the SEC payroll but who operate independently and
have specialized legal expertise.
Critics say they create unfair advantages for the SEC. There is
limited discovery, trials are fast-tracked and defense attorneys
cannot generally take depositions. Also, they say the appeals
process is conflicted because defendants must first appear before
the same five-member commission that authorized the enforcement
action before they can get an audience before a U.S. appeals court.
"Increasingly, people's livelihoods are subject to an administrative
process before a judge who is employed by the agency that has
brought the proceeding, whose decisions are reviewed by the agency
that brought the proceeding," said Locke Lord partner Michael Perlis,
who once tried a case before Elliot.
"At some point I think there may be serious constitutional
challenges to the breadth of administrative proceedings and the
scope of review."
"RIGID" SENSE OF RIGHT AND WRONG
Of the three judges who sit on the SEC bench, Elliot has the
shortest tenure, having joined in April 2011. He served as a
submarine officer in the U.S. Navy and Naval Reserve and holds a
physics degree from Yale and a law degree from Harvard, according to
his SEC biography.
He clerked for a judge in the U.S. District Court of Nevada, served
as a trial attorney on patent litigation at the Justice Department,
worked as an assistant U.S. attorney in both Miami and Brooklyn, and
spent a few years handling intellectual property litigation in
private practice at Darby & Darby.
As many administrative law judges do, Elliot started his judicial
career at the Social Security Administration in 2008.
Elliot declined to be interviewed by Reuters.
But according to former colleagues and lawyers who have practiced
before him, Elliot has a reputation for being an even-tempered
person with a sharp legal intellect.
"He has this kind of ability to just take a complicated situation,
either the facts or law, and voluminous discovery, and distill it
down to a very straightforward, clear legal brief," said Pierre Yanney, a partner at Stroock & Stroock & Lavan LLP who hired Elliot
at Darby & Darby.
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Yanney also pointed to his "rigid" sense of right and wrong. When
Elliot became an administrative law judge, he would never allow
Yanney to spend more than the minimum allowed by law whenever the
two met for lunch — about $13.
"We went a few times to this Indian buffet that was like $12.99,"
Yanney said with a laugh.
Defense attorneys say Elliot is viewed as being sympathetic to the
agency's enforcement division. He has issued more than 50 "initial
decisions" at the SEC, and while the SEC has not always gotten
everything it wanted, he has yet to rule against the agency.
At the same time, however, none of his initial decisions have been
overturned on appeal, suggesting they have legal muster to withstand
challenges.
Elliot's record of siding with the SEC is in contrast to some of his
peers, including Chief Judge Brenda Murray, who has a more mixed
case history and a reputation for being a wild card.
In 2011, for instance, she rejected the SEC's case against two State
Street executives accused of misleading investors about
mortgage-backed securities.
FROM GANGS TO GREENPEACE
As a prosecutor in Miami, Elliot pursued a variety of cases, from
identity theft and drug trafficking to gang violence.
His colleagues in the office of the U.S. Attorney for the Southern
District of Florida said he was a "trial machine," holding the
record in his unit for bringing the most cases to trial.
One notable case involved a ruthless gang in Northern Miami known as
the Terrorist Boyz. "I remember the satisfaction he got out of this
case was the fact he was clearing the community of some really bad
elements," said Markenzy Lapointe, a partner at Boies, Schiller &
Flexner LLP who worked with Elliot.
The case was so dangerous that one government informant was killed
and Elliot also received threats, Lapointe said.
Another case that grabbed national media attention involved an
indictment Elliot filed against Greenpeace.
The case was controversial because Elliot relied on a 19th century
"sailor mongering" law as a basis to bring charges against
Greenpeace after two of its activists boarded a cargo ship to
protest the illegal importation of Amazon mahogany.
Critics pounced on the Justice Department, saying it was trampling
on Greenpeace's free-speech rights. Lauren Fleischer Louis, who
worked in the U.S. Attorney's Office with Elliot and is now a
partner at Boies, Schiller & Flexner, said she does not believe the
high level of scrutiny phased Elliot.
She said the case showcased his sharp legal mind. "He is almost like
a computer in his ability to file away information and pull it back
at the right time and make a connection between two things that to
most people on the surface would seem unconnected," she said.
Elliot ultimately lost the Greenpeace case after a federal judge
acquitted the group. But his former colleagues said he generally did
not dwell on it when he lost a case.
"He never backed down from a case," Louis said. "His actions
demonstrate that if a grand jury believed there was enough to
indict, he would present it to a jury. He didn't mind his losses and
he didn't take them personally."
(Reporting by Sarah N. Lynch; additional
reporting by Aruna Viswanatha; editing by Karey Van Hall and Dan
Grebler)
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