The former CEO of Assisted Living Concepts Inc. can’t bring a constitutional challenge to the U.S. Securities and Exchange Commission’s in-house court when a proceeding against her is ongoing, the Supreme Court ruled Monday.
The high court upheld a Seventh Circuit ruling denying Laurie Bebo’s petition that seeks review of whether she can raise such a challenge before the end of an SEC proceeding against her. In October, an administrative law judge ordered Bebo to pay $4.2 million in civil penalties for violating the Securities and Exchange Act and prohibited her from serving in director and officer positions after the commission filed suit against her in 2014. But by December, the SEC had agreed to review the decision, meaning proceedings against her haven’t completely wrapped up and she must wait for a final decision in her ongoing administrative case before she can renew her challenge.
The SEC alleged that Bebo and former CFO of Assisted Living Concepts (now Enlivant) John Buono conducted a scheme to meet lease requirements by falsifying documents with fake occupants. As part of the scheme, the two supposedly misrepresented their occupancies at multiple properties by listing family members, friends and past and current employees as residents, when they didn’t actually live in the communities.
Bebo’s petition for review is the first the Supreme Court has ruled on, but there’s at least one other pending, according to Law360. Others have challenged the SEC’s internal forum, as well, arguing that the administrative law judges on the court violate the appointments clause of the Constitution, because they are hired rather than being appointed by the president, the courts or the commission itself.
“The consequences for the SEC’s enforcement authority, should Bebo’s claims be found meritorious, are enormous,” Bebo’s petition states.
The commission’s administrative court undermines the right to due process and equal protection for unregulated entities and individuals like Bebo, and gives them power to seek penalties against such parties unconstitutionally, according to her petition.
A representative for the SEC declined Law360’s request for comment, and a representative for Bebo could not be reached Monday for comment.
Written by Kourtney Liepelt