Seventh Circuit Boosts SEC’s In-House Court

(CN) - Despite recent setbacks, the Security and Exchange Commission's internal court system received a clean bill of constitutional health on Monday in the fraud case of an embattled chief executive of homes for the elderly.

Laurie Bebo, the former head of Assisted Living Concepts Inc., hoped to scuttle the commission's administrative proceedings accusing her of listing fake occupants at some senior facilities to meet lease requirements.

The commission's so-called "in-house" court system only sprang to existence five years ago under the Dodd-Frank Wall Street Reform and Consumer Protection Act, allowing regulators to bring case internal that otherwise would have been tried in federal court.

In cases throughout the country, Bebo and other executives have claimed that the administrative proceedings fall short of due-process standards.

Standard & Poor's executive Barbara Duka and real estate developer Charles Hill Jr. recently swayed federal judges in New York and Georgia on that view, but Bebo has had less success with the argument in Wisconsin.

U.S. District Judge Rudolph Randa threw out her case earlier this year, and the Seventh Circuit unanimously allowed the administrative proceedings against Bebo to continue Monday.

Writing for the three-person appellate panel, Judge David Hamilton noted that Bebo could always challenge the proceedings on appeal by seeking "judicial review in this court or in the D.C. Circuit."

"Upon filing the record in the court of appeals, the court's jurisdiction would become 'exclusive,' and it would have the power to 'affirm or modify and enforce or to set aside the order in whole or in part,'" the 20-page opinion states.

Either way, the judges found Bebo's litigation doomed from the start.

"We see no evidence from the statute's text, structure, and purpose that Congress intended for plaintiffs like Bebo who are already subject to ongoing administrative enforcement proceedings to be able to stop those proceedings by challenging the constitutionality of the enabling legislation or the structural authority of the SEC," the opinion states.

The SEC declined to comment, and Bebo's attorney did not immediately respond to a request for comment.

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