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securities and exchange commission
Supreme Court's Right-Wing Majority Delivers Gift to Corporate Criminals
Decision in SEC v. Jarkesy decried as a "victory for the wealthy and powerful" delivered by a right-wing majority that once again put "corporations, Wall Street, and billionaire benefactors over everyday Americans."
Jun 27, 2024
The U.S. Supreme Court on Thursday ruled along ideological lines that the Securities and Exchange Commission cannot use in-house legal proceedings to civilly penalize fraudsters, a decision that could strike a devastating blow to federal agencies' ability to fight corporate crime.
In the 6-3 decision, the high court's conservative supermajority deemed the SEC's in-house proceedings unconstitutional, siding with the U.S. Chamber of Commerce and other big business-aligned organizations that weighed in on the side of the plaintiff—conservative radio host and hedge fund manager George Jarkesy, who was accused by the SEC of defrauding investors and ordered to pay a $300,000 civil penalty.
Jarkesy argued the SEC proceedings violated his Seventh Amendment right to a jury trial. But as Vox's Ian Millhiser observed, "the Constitution treats civil trials very differently from criminal proceedings."
"While the Sixth Amendment provides that 'in all criminal prosecutions' the defendant is entitled to a jury trial," Millhiser wrote, "the Seventh Amendment provides a more limited jury trial right, requiring them 'in suits at common law.'"
Millhiser argued that with its ruling in SEC v. Jarkesy, the high court effectively "lit a match and tossed it into dozens of federal agencies."
The Supreme Court's three liberal judges dissented from Thursday's decision, with Justice Sonia Sotomayor denouncing the ruling as "a power grab" with potentially "momentous consequences."
"Today's ruling is part of a disconcerting trend: When it comes to the separation of powers, this court tells the American public and its coordinate branches that it knows best," Sotomayor wrote, warning that the decision "means that the constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress."
Congress would have to give a bunch of federal agencies VASTLY more money and personnel to handle all the jury trials they would need to conduct to patch the hole that SCOTUS just blew in their enforcement powers. It won't happen. This case will just let lawbreakers off the hook.
— Mark Joseph Stern (@mjs_DC) June 27, 2024
Consumer advocates and watchdog organizations warned the high court's decision in SEC v. Jarkesy could have implications that extend well beyond the Securities and Exchange Commission, given that other key agencies—including the Federal Trade Commission, the Federal Mine Safety and Health Review Commission, and the Environmental Protection Agency—use internal legal proceedings overseen by an administrative law judge.
The Associated Pressnoted Thursday that the SEC "had already reduced the number of cases it brings in administrative proceedings pending the Supreme Court's resolution of the case."
"Today's decision is another step in the long-term corporate project of neutering federal agencies' ability to protect the public from fraudsters, rip-offs, dangerous products, carbon polluters, and more," Robert Weissman, president of Public Citizen, said in a statement. "The decision will have near-term consequences for the financial system, as it hinders the SEC's ability to seek critical penalties."
As a result of Thursday's ruling, said Weissman, some federal agencies "will need new authority from Congress, which is not doing much legislating, in order to be able to enforce the law."
"The decision extols the Seventh Amendment, but shows little respect for the separation of powers that is at the heart of our constitutional system," Weissman added. "There's also more than a little irony in this court touting the right to access the court system, when it has broadly allowed companies to require consumers to use arbitration rather than protecting their right to access the courts."
"In gutting the federal government's ability to enforce laws enacted by Congress, this ruling gives special interests even more power to set the rules for the rest of us."
As Politicoreported last month, an "alliance of tech billionaires, conservative legal activists, and the business lobby" joined the fight to strip the SEC of the key enforcement tool.
The outlet noted that "since Jarkesy was filed, companies including Meta, SpaceX, and Amazon have escalated it into a broader fight against federal power by suing other agencies over their own courts—a way of fighting unfavorable judgments by attacking the system that delivered it."
The Revolving Door Project noted in an analysis released Thursday that at least 13 organizations with "ties to court-whisperers and judicial gift-givers like Leonard Leo, Charles Koch, Paul Singer, Harlan Crow, and wealthy elites in the Horatio Alger Association in which Clarence Thomas is a key member" submitted amicus briefs supporting Jarkesy's fight against the SEC.
"Some of the organizations that supported the weakening of the SEC have direct ties to the powerful friends and benefactors of the court," the group said. "The very same people who are flying Clarence Thomas and Samuel Alito to vacation destinations on private jets are closely tied to organizations that are urging the court through amicus briefs to rule in a manner favorable to corporate wrongdoers."
Caroline Ciccone, president of the watchdog group Accountable.US, said in a statement Thursday that the Supreme Court's decision "is a victory for the wealthy and powerful, delivered by a Supreme Court conservative majority all too used to putting corporations, Wall Street, and billionaire benefactors over everyday Americans."
"In gutting the federal government's ability to enforce laws enacted by Congress, this ruling gives special interests even more power to set the rules for the rest of us," said Ciccone. "Let's be clear: This is a power grab that will ultimately harm ordinary people by making it harder for federal agencies to hold corporations accountable for misdeeds."
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How to Reduce the CEO-Worker Pay Gap? Impose Consequences
One promising possible consequence that U.S. lawmakers could pursue is a tax hike on corporations that pay their CEOs at 50 times or more than what they pay their most typical employees.
Jun 20, 2024
Some 87% of Americans, polling tells us, consider today’s growing gap between U.S. CEO and worker pay a serious cause for national concern.
That gap has become a cause for global concern as well. CEO-worker pay gaps in the United States, as data in a new Altrata report make clear, are essentially cementing in place our world’s current “colossal” maldistribution of income and wealth.
In the decade ahead, the Altrata report forecasts, more than a quarter of the world’s wealthy worth at least $5 million will be passing on “almost $31 trillion” to their nearest and dearest. Some 64% of that $31 trillion will be coming from the world’s richest of the rich, those “ultra wealthy” deep pockets individually worth over $30 million.
We need more than disclosure, posit advocates for fairer corporate compensation. We need consequences.
Corporate executives, Altrata calculates, will make up over 71% of those global “ultra wealthy.” Another 21% of these ultras will be entrepreneurs who either founded or co-founded their own business empires. And nearly half of all these corporate execs and entrepreneurs, add Altrata’s researchers, will be deep-pocketed souls who call the United States home, “a testament” to America’s continuing status as the nation with by far the “world’s largest” population of ultra wealthy.
In other words, the world will see over the next 10 years “the transfer of a staggering level of wealth,” and American top corporate execs will be sitting right in the center of that transfer. The billions these execs have amassed since the early 1980s—the years when CEO pay started soaring—will be vastly expanding the ranks of those who hold massive amounts of inherited wealth.
None of this, of course, should come as much of a surprise. CEO pay levels in the United States have now been making headlines for well over four decades. And this year those executive pay stats are showing what The New York Times has dubbed a “new wrinkle.”
Over the past half-dozen years, under the authority of the 2010 Dodd-Frank Act, the federal Securities and Exchange Commission has been requiring publicly traded corporations to annually disclose the ratio of their CEO pay to their median employee pay. The value of the stock rewards in that CEO pay has up until now reflected the share value of those stock rewards when the CEOs received them.
Share values can, of course, increase substantially over time. The original SEC pay-ratio regulations didn’t require corporations to figure those increased stock values into their CEO-worker pay ratios. The new SEC rules do require companies to “disclose how much CEO stock holdings increase when the market rises.”
The difference between the original and “new wrinkle” approaches can be substantial.
Under the original approach, America’s 10 most highly paid CEOs last year collected between 510 and 3,769 times what their company’s most typical employee earned, with the year’s top-paid chief exec collecting $199 million.
Under the SEC’s “new wrinkle” accounting approach, all the 10 highest-paid U.S. chief execs in 2023 saw their compensation run over $199 million, with 4 of the top 10, analysts at Equilar calculate, making over $600 million and two more making over $300 million.
By either calculation, of course, contemporary U.S. CEOs are making fantastically more than their CEO counterparts back in the middle of the 20th century. In the 1960s, the Economic Policy Institute has pointed out, chief execs at major U.S. corporations seldom pocketed much more than 20 times the pay that went to their workers. Since then, the CEO-worker pay gap has quadrupled—and then quadrupled again.
The “new wrinkle” approach the SEC has added into the annual pay disclosure mix aims to give the American public a more accurate sense of just how outrageously wide the CEO-worker pay gap now stretches. The new numbers, disclosure advocates seem to believe, will do a better job of shaming corporate boards into more compensation common sense.
The original SEC approach to disclosure certainly didn’t do much shaming. Corporations that have disclosed their CEO-worker pay ratios under that original approach have not seen “any significant change in the level of CEO pay,” notes the University of Colorado business school’s Bryce Schonberger, a co-author of a recent chief executive pay study.
But the “new wrinkle” approach, unfortunately, doesn’t seem at all likely to produce much “significant change” either. We need more than disclosure, posit advocates for fairer corporate compensation. We need consequences. What might those consequences be? Some of the nation’s top CEO pay experts explored that question earlier this week at the U.S. Senate Budget Committee’s first-ever hearing on executive pay overreach.
Among the witnesses: Sarah Anderson, the Institute For Policy Studies Global Economy Program director. One national poll last month, Anderson told the Senate panel, asked likely voters about a promising possible consequence that lawmakers could pursue: a tax hike on corporations that pay their CEOs at 50 times or more than what they pay their most typical employees.
Some 80% of those polled, noted Anderson, supported that idea, “including large majorities in every political group.”
Taxes on corporations with outrageously wide CEO-worker pay differentials, Anderson added, give corporations with huge internal pay disparities two basic choices: either narrow their pay gaps or face a bigger IRS bill at tax time.
“A company where half of employees earn less than $60,000, for instance, would have to limit CEO compensation to no more than $3 million or raise worker pay to avoid higher taxes,” Anderson explained in her testimony. “In 2022, average S&P 500 CEO pay hit $16.7 million.”
Could moves like taxing corporations that pay their top execs far more than their workers gain any traction in Congress? Maybe. Some lawmakers already back that notion. Count the chair of the Senate Budget Committee, Rhode Island’s Sheldon Whitehouse, as one of those lawmakers.
“Our tax code is corrupted and rotten, turned upside down for special interests,” the senator charged at his panel’s June 12 hearing.
What can we do about that corruption? Whitehouse advanced a number of fixes. Among them: Raise taxes on “companies that pay their CEOs more than 50 times what they pay their average worker.”
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Tracking of Planned Parenthood Visits 'Should Terrify Every Single American'
Sen. Ron Wyden warns that "if a data broker could track Americans' cellphones to help extremists" send ads to clinic visitors, "a right-wing prosecutor could use that same information to put women in jail."
Feb 14, 2024
U.S. Sen. Ron Wyden and privacy rights advocates this week are sounding the alarm about an anti-abortion group using cellphone location data to send misinformation to people who visited hundreds of Planned Parenthood clinics across the country.
"If a data broker could track Americans' cellphones to help extremists target misinformation to people at hundreds of Planned Parenthood locations across the United States, a right-wing prosecutor could use that same information to put women in jail," Wyden (D-Ore.) said in a statement Tuesday.
"Federal watchdogs should hold the data broker accountable for abusing Americans' private information," he added. "And Congress needs to step up as soon as possible to ensure extremist politicians can't buy this kind of sensitive data without a warrant."
"That data brokers can track people visiting Planned Parenthood is terrifying enough. That law enforcement agencies can simply buy this type of sensitive data—rather than getting a warrant—is even worse."
Since the right-wing U.S. Supreme Court reversedRoe v. Wade with its June 2022 decision in Dobbs v. Jackson Women's Health Organization, anti-choice state policymakers have ramped up attacks on abortion rights, elevating concerns about patient privacy.
Wyden explained in a Tuesday letter that his office launched an investigation after The Wall Street Journalreported last May that the Veritas Society, a nonprofit established by Wisconsin Right to Life, hired the advertising agency Recrue Media for an anti-abortion ad campaign targeting clinic visitors, whose locations were tracked by the data broker Near Intelligence.
As Wyden wrote to Federal Trade Commission (FTC) Chair Lina Khan and U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler:
My staff spoke with Steven Bogue, the co-founder and managing principal of Recrue Media on May 19, 2023, who revealed that to target these ads, his employees used Near's website to draw a line around the building and parking lot of each targeted facility. On May 26, 2023, my staff spoke with Near's chief privacy officer, Jay Angelo, who confirmed that, until the summer of 2022, the company did not have any technical controls in place to prevent its customers targeting people who visited sensitive facilities, such as reproductive health clinics.
On a webpage that has since been taken down, but was saved by the Internet Archive, the Veritas Society stated that in 2020 in Wisconsin alone, it delivered 14.3 million ads to people who visited abortion clinics, and "served ads to those devices across the women's social pages, Facebook, Instagram, and Snapchat." The scale of this invasive surveillance-enabled ad campaign remains unknown, however, Mr. Bogue told my staff that the company used Near to target ads to people who had visited 600 Planned Parenthood locations in the lower 48 states.
Justin Sherman, who studies data brokers at Duke University, toldPolitico that "this is the largest targeting campaign we've seen to date against reproductive health clinics based on brokered data."
Wyden also highlighted Journalreporting from October about Near selling location data to defense contractors that resold it to U.S. Defense Department and intelligence agencies. He wrote that Angelo, the privacy officer, "confirmed that the company had for three years sold location data to the defense contractor AELIUS Exploitation Technologies."
"Mr. Angelo revealed that after joining Near in June of 2022, he conducted a review of the company's practices and discovered that the company was facilitating the sale of location data to the U.S. government that had been obtained without user consent," the senator continued, noting the removal of "misleading statements" from Near's website.
"The former executives that led Near during the period in which it engaged in these egregious violations of Americans' privacy are now under criminal investigation, according to a statement made by the company's lawyer during a December 11, 2023, bankruptcy hearing. But prosecuting those individuals for engaging in financial fraud will not address Near's corporate abuses," Wyden argued, urging the FTC and SEC to take various actions over the company's "outrageous conduct" that "recklessly harmed the public and investors."
Wyden's letter comes as the Republican-controlled U.S. House plans to take up the Reforming Intelligence and Securing America Act, which would reform Section 702 of the Foreign Intelligence Surveillance Act (FISA), spying powers temporarily extended late last year that agencies—especially the Federal Bureau of Investigation (FBI)—have abused.
Section 702 only allows warrantless surveillance targeting foreigners located outside the United States, but Americans' data is also swept up, and privacy advocates within and outside of Congress—including Wyden—have long been pushing for warrant protections, a key issue in this week's debates about the Republican-led reform bill.
Responding to Wyden's letter, Rep. Zoe Lofgren (D-Calif.) said Wednesday that "this is outrageous. Americans' most personal private health data is being bought and sold for politics. Major surveillance changes are needed. i.e. If Congress acts, reforms from our Fourth Amendment Is Not For Sale Act must be part of a FISA reform."
Reintroduced by Lofgren, Wyden, and a bipartisan coalition of lawmakers last July, that bill would require the U.S. government to get a court order compelling data brokers to disclose information as well as bar law enforcement and intelligence agencies from buying data on people in the U.S. and Americans abroad if it was obtained from a user's account or device, or deceptive practices.
Privacy rights campaigners and experts also responded to Wyden's letter with renewed calls for closing the
data broker loophole.
"That data brokers can track people visiting Planned Parenthood is terrifying enough. That law enforcement agencies can simply buy this type of sensitive data—rather than getting a warrant—is even worse,"
said Ashley Gorski, senior staff attorney at the ACLU's National Security Project. "This Thursday, Congress must vote to close the loophole for law enforcement purchases from data brokers. The government shouldn't be able to buy its way around the Fourth Amendment."
The organizations
Demand Progress and EPIC concurred in social media posts sharing Politico's reporting on the letter.
"The continued sale of our most sensitive information to and by shady data brokers not only fuels harmful surveillance advertising systems, but enables government agencies—from local police departments to state attorneys general to the FBI—to sidestep the Fourth Amendment,"
said EPIC counsel Sara Geoghegan in a statement. "We urgently need to rein in data brokers and enact comprehensive privacy rules to protect us from these grave harms in the post-Roe era we live in."
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