SEC Is A Due Process Nightmare: Searches Emails Without A Warrant, Refuses To Share Exculpatory Evidence
from the the-sec-doesn't-like-the-constitution dept
Two stories popped up last week that raise serious concerns about the way that the SEC tramples on the Constitution. The first is that in a hearing, SEC boss Mary Jo White was asked why the SEC is so resistant to ECPA reform and what's wrong with getting a warrant, and more or less admitted that it's standard practice for the SEC to not get a warrant, but to rely on loopholes in ECPA to get access to emails. Prior to this, many had assumed that this was just a desire of the SEC, not that they were regularly doing it. But White's answer makes it clear that the SEC views this practice -- which seems like it should be a clear 4th Amendment violations -- as standard operating procedure.
Meanwhile, concerning a separate issue, Mark Cuban and his lawyer published an op-ed in the Wall Street Journal last week, discussing the SEC's totally bogus case against him for insider trading, which got tossed out by a lawyer. The key issue they discussed is how the SEC had exculpatory evidence that proved Cuban had done no wrong from back in 2004 -- and then did everything possible to avoid turning over that evidence, as is normally required in legal proceedings.
In a criminal trial, the federal government has long been obliged to promptly turn over to the defense any evidence that could show that the accused did not commit the offense of which he is accused. The Brady rule (announced in the 1963 Supreme Court case, Brady v. Maryland), prevents one-sided prosecutions in which the defendant is kept in the dark about information that might show that he is innocent.At issue were notes the SEC had concerning the details of Cuban's conversation with the CEO of Mamma.com, the search engine Cuban had invested in (and then sold all his shares in), which showed that, contrary to the SEC's claims in the case against him, Cuban had never made certain promises. When Cuban and his lawyer asked for these notes, the SEC resisted.
The government's job as criminal prosecutor is not to obtain convictions, but "to do justice," according to the traditional legal maxim. It should be required to follow the Brady rule in civil trials as well. But the SEC does not, even when it accuses a citizen of fraud. Had the agency complied with this simple rule in its recent insider-trading case against one of us, Mark Cuban, it is unlikely that a lawsuit would even have been filed, let alone go to trial.
The SEC, however, resisted the disclosure of these notes for the next three years. Even up until the time Mr. Cuban took the stand, the SEC continued to fight to keep the notes from being shown to the jury by asking the judge to exclude them from evidence. Fortunately, the judge disagreed and the jury ultimately cleared Mr. Cuban of a charge of insider trading.So, reading both of these stories, we see that the SEC feels that it is free to ignore both the 4th Amendment (against search and seizure without a warrant) and the 14th Amendment (concerning due process). Don't we think that agencies of the federal government should be required to follow the Constitution -- especially basic concepts like protecting the privacy of individuals and giving them basic due process? And, for those of you who think this is no big deal, because it's the SEC, and the SEC just goes after big bad bankers and the like, recognize that the agency following right behind the SEC in fighting ECPA reform is the IRS. Do you feel it's similarly okay for the IRS to search your emails and electronic records without a warrant while also believing that it need not share any of the exculpatory evidence it finds, proving your innocence, while bringing a case against you for violating the law?
Oh, and just for the hell of it, let's take this a step further. Just a few weeks ago, the NY Times reported on an increasingly popular tactic of law enforcement to effectively use the SEC to trick people into effectively implicating themselves in criminal cases. It tells the story of a low-level guy who worked at a law firm, and was asked by the SEC to "help out" with an investigation. Only at the last minute, was it mentioned that someone from the district attorney's office would be present -- and at no time was there any indication that the guy was being investigated for criminal behavior. But thanks to the SEC smokescreen, the guy was indicted, and he's still not sure why.
So, now it's an SEC that ignores the Constitution, searches emails without a warrant, hides exculpatory evidence and surreptitiously uses these "investigations" to help build out criminal charges against people on a highly questionable basis. See the problem, yet?
The folks over at VanishingRights.com are fighting to reform ECPA, which would at least solve half of the problem above. Right now, the SEC and the IRS remain the main government agencies aligned against such reform. It's time to tell those agencies that they need to obey the Constitution too.