Former Assisted Living Concepts CEO Laurie Bebo cannot challenge in federal court the constitutionality of the U.S. Security and Exchange Commission’s use of an administrative law judge instead of a federal judge and jury while a proceeding against her is under way, the U.S. Supreme Court effectively said by denying a petition for writ of certiorari that she had filed Feb. 3. The court’s March 28 action lets stand an earlier ruling by the 7th U.S. Circuit Court of Appeals.
The Supreme Court receives about 7,000 petitions for writ of certiorari every year, according to the Administrative Office of the U.S. Courts. It typically only accepts those that “could have national significance, might harmonize conflicting decisions in the federal circuit courts, and/or could have precedential value.” Four of the nine justices must agree to hear the case for it to be considered.
Bebo’s filing stemmed from a legal case that began in 2014 when the SEC filed fraud charges against Bebo and ALC’s then-CFO, John Buono. The commission alleged that the two directed employees to include phony residents in occupancy rate and coverage ratio calculations for eight properties from 2009 to 2012.
Buono settled his case with the SEC in 2015, but Bebo filed a lawsuit against the commission, maintaining that its internal proceedings, using an administrative law judge instead of a federal judge and jury, would deprive her of her rights to equal protection and due process. The 7th U.S. Circuit Court of Appeals, however, dismissed the lawsuit in August, saying it lacked jurisdiction. The appeals court also said that Bebo could not raise a constitutional challenge in the fraud case against her until the SEC’s in-house process was complete.
An SEC administrative law judge heard Bebo’s case in June and in October ordered her to pay a $4.2 million civil penalty and permanently barred her from serving as an officer or director of any issuer that has a class of securities registered with the SEC or is required to file reports with the commission. In December, however, the SEC agreed to review the administrative law judge’s decision. At that time, the SEC told Bebo that she had until Jan. 7 to file the opening brief of her administrative appeal, but on Dec. 24, the commission granted Bebo’s request for an extension. The new deadline for her opening brief was Jan. 27. The SEC’s response was due Feb. 29, and Bebo’s reply brief was due March 14.
Attorneys for all parties involved in the case did not respond to requests for comment from McKnight’s Senior Living.